UC-NRLF 


$B    37    3M7 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/clearinghousesthOOcannrich 


>  or  THE       ^i 

UNIVERSITY 

califobS^ 


ENTRANCE    TO    THE    LONDON    CLEARING    HOUSE. 


CLEARING-HOUSES 


THEIR    HISTORY,   METHODS 
AND  ADMINISTRATION 


BY 

JAMES   G.  CANNON 

Vice-President  of  the  Fourth  National  Bank  of  the  City  of  New  Yoric 


^  OF  THE  r 

JNIVERSIT^ 
^SfjCALIFOP^ 


NEW  YORK 

D.  APPLETON   AND  COMPANY 
1900 


^Q 


Copyright,  1900.  by 
JAMES    G.    CANNON 

NEW  YORK 


^ 


z^  ^' 


TROW  DIRECTORY 

PRINTING  AND  BOOKBINDINQ  COMPANY 

HEW  YORK 


THIS    BOOK 

IS    AFFECTIONATELY    DEDICATED 

TO 

MY  MOTHER 


82901 


PREFACE 

When  attempting  some  time  since  to  make  an  in- 
vestigation regarding  some  matters  connected  with  the 
New  York  Clearing-house,  I  discovered,  greatly  to  my 
surprise,  that  there  was  no  book  which  gave,  in  suc- 
cinct form,  a  history  of  the  clearing-houses  of  the  United 
States  or  a  description  of  their  methods.  There  have 
been  many  articles  published  separately  in  magazines 
and  newspapers  on  some  of  the  more  notable  clearing- 
houses, but  no  attempt  appears  to  have  been  made  to 
incorporate  in  one  volume  comprehensive  data  regard- 
ing the  different  institutions  of  this  character  that  are 
in  operation  in  the  large  cities  of  the  nation. 

A  knowledge  of  the  workings  of  these  organizations 
is  of  great  importance  to  the  banker  of  the  present  day. 
Accordingly,  I  resolved  that  if  it  were  a  possible  thing 
to  do,  I  would  gather  together  such  information  of  this 
kind  as  might  seem  to  be  of  interest  to  the  banker  and 
the  student  of  finance  and  publish  the  same  in  a  form  to 
serve  as  a  convenient  reference.  A  banker's  life  is  a  busy 
one,  but  in  such  time  as  I  have  been  able  to  devote  to 
the  work,  I  have  collected  the  material  upon  which  this 
volume  is  based. 

It  has  been  my  effort  to  make  the  work  as  complete 
and  accurate  as  possible.  The  chapters  on  the  more 
important  clearing-houses  have  been  submitted  to  those 


VI  PREFACE 

identified  with  their  administration  for  criticism.  A 
sharp  lookout  has  been  maintained  for  any  modifications 
of  established  rules  since  the  manuscript  was  begun.  It 
is  not  supposed,  however,  that  the  book  goes  forth  with- 
out errors  and  omissions.  I  hope  that  such  of  these  as 
may  be  found  to  exist  will  prove  to  be  unimportant  in 
character  and  of  such  a  nature  that  they  can  be  readily 
corrected  in  a  future  edition. 

In  view  of  the  increase  in  the  attention  given  to  eco- 
nomic subjects,  and  even  practical  financial  methods,  in 
our  colleges,  it  is  hoped  that  this  book  may  prove  of  use 
to  instructors  and  in  some  cases  to  students. 

I  take  this  occasion  to  express  my  deep  appreciation 
of  the  valuable  services  rendered  to  me  by  many  of  my 
banking  friends  throughout  the  country.  I  am  espe- 
cially indebted  to  Mr.  Thomas  Coleman,  who,  under  my 
direction,  visited  a  large  number  of  clearing-houses  and 
procured  much  of  the  data  incorporated  in  the  chapters 
following.  I  am  also  profoundly  grateful  for  the  very 
serviceable  aid  given  me  by  Mr.  William  Sherer,  Man- 
ager of  the  New  York  Clearing-house;  Mr.  W.  D.  C. 
Street,  Manager  of  the  Chicago  Clearing-house;  Mr. 
C.  A.  Ruggles,  Manager  of  the  Boston  Clearing-house, 
and  Mr.  T.  A.  Stoddard,  Manager  of  the  St.  Louis  Clear- 
ing-house, and  many  others. 

If  this  volume  adds  anything  to  the  knowledge  of 

my  banking  friends  on  the  interesting  and  important 

subject  of  which  it  treats,  I  shall  feel  amply  repaid  for 

the  time  and  efforts  that  have  been  expended  upon  its 

production. 

J.  G.  C. 

20  Nassau  Street,  New  York. 


TABLE   OF  CONTENTS 


I.  Classes  of  Clearing-Houses. 

A  Clearing-house  Defined — Clearing-houses  Classified 
with  Respect  to  Functions — Clearing-houses  Classified 
with  Respect  to  the  Funds  Used  in  Settlements      .        .      i 

II.  Clearing-House  Terms. 

How  Usages  Differ — The  Meaning  of  "  To  Clear " — 
Clearings — Exchange  and  Exchanges — Bills  and  Bills 
of  Exchange — Draft  and  Check — Accounts  Balanced 
and  Balances  in  Accounts — Collections — Items — Clear- 
ing-matter —  Settlements  —  Out-of-town  Checks  and 
Country  Checks 3 

III.  Special  Functions  of  a  Clearing-House. 

Primary  Object — Extension  of  Field — List  of  Special 
Functions — Action  of  Clearing-house  Banks  at  Out- 
break of  the  Civil  War — Mutual  Assistance  of  Members 
— Fixing  Rates  of  Interest  on  Deposits — The  Practice 
in  Sioux  City — Establishing  Rates  of  Exchange — Some 
Buffalo  History — Rochester — Baltimore^Houston — To- 
ledo— Topeka — St.  Louis — Denver — West  Superior — 
St.  Joseph — Clearing-house  Loan  Certificates        .        .11 

IV.  Possible  Developments  of  the  Clearing-House  System. 

New  Functions  to  be  Exercised — Country  Checks — Trans- 
fer of  Currency  from  Point  to  Point — Possible  Use  of 
Gold  Certificates — Special  Examiners — Settlement  of 
Balances — Advantages  of  the  Cash  Basis — Clearing- 
house Depositories — The  Use  of  Depository  Certificates    23 

V.  The  Administration  of  Clearing-Houses. 

List  of  Officials — Duties  of  Officers — Committees — An- 
nual Meetings — Plan  of  Administration  in  Canada — 
Duties  of  Officers  and  Committees        ....    28 


viii  TABLE   OF    CONTENTS 

PAGE 

VI.  The  Settlement  of  Clearing-House  Balances. 

Results  Accomplished  by  Settlements — Ratio  of  Bal- 
ances to  Clearings — Settlements  with  Money — Clear- 
ing-house Settlements  in  Canada — Money  in  Labelled 
Packages — Objections  to  Silver — Methods  of  Settling 
Balances  Without  Money — Advantages  of  the  Man- 
ager's Check  Over  Settlements  in  Cash      .        .        -35 

VIL  Clearing-House  Exchanges. 

Location  of  Clearing-houses — Arrangement  of  Furni- 
ture— Hour  of  Making  Exchanges — Clearing  Matter 
— Character  of  Indorsements — Messengers  and  Set- 
tling Clerks — Conducting  the  Exchanges — Determin- 
ing Balances — Two  Clearings  a  Day — Detroit  Plan 
of  Handling  Collections 47 

VIII.  Clearing  Country  Checks. 

The  Growing  Use  of  Checks — The  Small  Percentage  of 
Actual  Money  Used  in  Business — The  Difficulty  of 
Country  Checks — Remedies  Proposed — State  and  Na- 
tional Clearing-houses — The  Long  Island  Experiment 
— The  Success  at  Sedalia,  Mo 62 

IX.  Typical  Journey  of  a  Country  Check  Remitted  for  a 
City  Account. 
The  Small  Amount  of  Work  Required  of  Payer  and 
Payee — The  Large  Amount  of  Work  Required  of  the 
Bank  in  which  the  Check  is  Deposited  and  Its  Cor- 
respondent— What  the  Receiving  Bank  Does — What 
its  Regular  Correspondent  in  the  City  Nearest  the 
Country  Bank  is  Required  to  do — What  the  Coun- 
try Bank  has  to  do — An  Illustrative  Example      .        .    68 

X.  Clearing-House  Loan  Certificates. 

What  Clearing-house  Loan  Certificates  Are — Origin — 
Interest  Rates — Uses — First  Issue  in  i860 — The  Is- 
sues of  1861,  1863,  and  1864 — Action  of  Various  Clear- 
ing-houses in  1873 — New  Orleans  in  1879 — New  York 
in  1884 — Action  of  the  New  York,  Boston,  and  Phila- 
delphia Clearing-house  Associations  in  1890 — General 


TABLE   OF    CONTENTS  ix 

PAGE 

Resort  to  Loan  Certificates  in  1893 — Emergency  Cir- 
culation in  the  South — Boston  and  Philadelphia  in 
1895 — New  Orleans  in  1896 — Calculations  of  Interest    79 

XL-The  New  York  Clearing-House. 

Origin  and  Early  History — Formal  Organization  in 
1853 — First  Location — New  York  Clearing-house 
Building  Company — Cedar  Street  Property — Consti- 
tutional Provisions — Committees — Statistics  of  Mem- 
bership— Clearing  for  Non-members — Statements  of 
Condition  —  Capitalization  of  New  York  Banks — 
Records  of  Clearing-house 127 

XIL  Daily  Routine  of  the  New  York  Clearing-House. 

The  Clearing-room — Clerks  and  Messengers — The 
Manager's  Part — How  the  Exchanges  are  Made — 
The  Cash  Balance  Paid  in — The  Disbursements — 
Clearing-house  Gold  Depository — Restrictive  In- 
dorsements— Pro  Rating  of  Expenses — Record  of 
Fines — Table  of  Annual  Clearings — Table  of  Aver- 
age Daily  Balances 175 

XIII.  The  Clearing-House  Association  of  the  Banks  of 
Philadelphia. 
Early  History — Runners'  Exchange — The  Morning 
Exchange — Gold  Depository — Clearing-house  Due- 
bills — Settlements  without  the  Use  of  Money — Com- 
parison of  Bank  Statements — Collateral  Security — 
Assessment  of  Expenses — Admission  of  New  Mem- 
bers— Plan  of  Administration — List  of  Presidents — 
Failures  and  Resulting  Litigation        .        .        .        .209 

XIV.  The  Boston  Clearing-House. 

Formation  and  Early  History — Period  of  the  Civil  War 
— Settlement  of  Balances — Borrowing  and  Loaning 
Balances — Clearing  for  Outside  Banks        .        .        .  228 

XV.  Foreign  Department  of  the  Boston  Clearing-House. 
Organization   and   History— Regulations— Two   Clear- 
ing Hours — Blanks   and   Forms — Fines — Book-keep- 
ing     246 


TABLE   OF    CONTENTS 


XVI.  The  Chicago  Clearing-House, 

Date  and  History  of  Formation — Methods  of  Exchange 
— Preliminary  Exchanges  amortg  Members — Kinds 
of  Money  Employed  in  Settling  Balances — Trading 
Balances — Non-member  Banks  that  Clear — State- 
ments of  Condition — Expenses  and  Fines — Admis- 
sions and  Expulsions — Volume  of  Clearings — Ad- 
ministration     263 

XVII.  The  St.  Louis  Clearing-House. 

Early  History — Scope  of  Membership — Plan  of  Admin- 
istration— Management  of  Clearings — Records  Kept 
by  the  Manager 285 

XVHL  Canadian  Clearing-Houses. 

The  Banking  and  Currency  System  of  the  Dominion 
of  Canada — Limitations  of  Canadian  Clearing- 
houses— Form  of  Government — Routine  of  Ex- 
changes— How  Members  in  Default  are  Dealt  with 
—Monthly  Statements  to  the  Minister  of  Finance- 
Records  of  Clearing-house  Transactions   .        .        .  297 

XIX.  The  London  Clearing-House. 

Early  History — Stimulated  by  the  Example  of  New 
York — "  Out-clearers  "  and  "  In-clearers  " — Morn- 
ing Clearings  and  Afternoon  Clearings — The  Final 
Balance— Detail  of  Methods 321 

XX.  Japanese  Clearing-Houses. 

Location — Date  of  Formation — Hours  of  Clearing- 
Average  Daily  Clearings  and  Balances — Tokio 
Clearing-house — Volume  of  Clearings  and  Growth 
in  Ten  Years — Arrangement  of  Clearing-room — 
Abstract  of  Rules  and  Regulations  of  Tokio  Clear- 
ing-house        335 


LIST  OF   ILLUSTRATIONS 

The  London .  Clearing-house Frontispiece 


PAGB 


Form  of  Receipt  Given  by  Buffalo  Clearing-house  to  Debtor 

Banks  on  Payment  of  Balances 39 

Form  of  Receipt  Used  by  Buffalo  Clearing-house  Given  by  Cred- 
itor Banks  on  Receipt  of  Balances 41 

Certificate  of  Deposit  Used  by  the  Associated  Banks  of  Rich- 
mond, Va 43 

The  Clearing-room  of  the  New  York  Clearing-house  ,  .  .49 
Fac-simile  of  the  Check  the  Journey  of  which  is  Shown  on  the 

Map  on  Page  77 7^ 

Fac-simile  of  the  Back  of  the  Check  Showing  the  Numerous 
Indorsements   it  Bore   on   Finally   Reaching   the   Bank   on 

which  it  was  Drawn 75 

Map  Showing  the  Check's  Itinerary 77 

Form  of  Clearing-house  Loan  Certificate  Used  by  New  York 

Clearing-house  in  1873 89 

Form  of  Clearing-house  Loan  Certificate  Used  in  Philadelphia  93 
Form  of  Clearing-house  Loan  Certificate  Used  in  Boston  .  105 

Form  of  Clearing-house  Loan  Certificate  Used  in  Baltimore  .  107 
Form  of  Clearing-house  Loan  Certificate  Used  in  New  Orleans  109 
Form  of  Clearing-house  Loan  Certificate  Used  in  Cincinnati  .113 
Form  of  Clearing-house  Loan  Certificate  Used  in  Detroit  .  .115 
Form  of  Clearing-house  Loan  Certificate  Used  in  Atlanta,  Ga.  119 
Form  of  Clearing-house  Loan  Certificate  Used  in  Birmingham, 

Ala 121 

New  York  Clearing-house   (Front  View) 139 

New  York  Clearing-house    (View  down  Cedar  Street  from  a 

Point  near  Broadway) 141 

xi 


xii  LIST   OF   ILLUSTRATIONS 

PAGE 

View  in  Manager's  and  Assistant  Manager's  Rooms,  New  York 

Clearing-house 143 

Resolution    Authorizing    Exchanges    through    a    Member-bank 

(New  York) 153 

Application  to  Clear  for  Another  Bank  (New  York)    .        .        .  154 
Consent  to  Clear  for  Another  Bank  (New  York)  .        .        .        .155 
Form  of  Statement  of   Weekly   Averages   of   Brooklyn   Non- 
member  Banks 156 

Form  of  Statement  Required  of  Trust  Companies  by  the  New 

York  Clearing-house  Association 159 

Form  Used  by  the  New  York  Clearing-house  in  Tabulating  Na- 
tional Bank  Statements 160 

Form  Used  by  the  New  York  Clearing-house  in  Tabulating  State 

Bank  Statements        .        .        . 161 

Skeleton  of  the  Weekly  Statement  of  the  Associated  Banks  of 

the  City  of  New  York 162 

Form  of  Summary  of  Weekly  Statement  of  Associated  Banks 

(New  York) 163 

Form  of  Statement  Required  of  Associated  Banks  (New  York)  164 
Skeleton  of  Quarterly  Statement  of  National  Banks  (New  York)  165 
Skeleton  of  the  Quarterly  Statement  of  the  Condition  of  the 

State  Banks  of  the  City  of  New  York 166 

Skeleton  of  Weekly  Statement  of  Non-member  Banks   (New 

York) 167 

Agreement  to  Comply  with  Rules  and  Regulations   Regarding 

Collections  Outside  of  New  York 172 

Form  of  Exchange  Slip  (New  York) 177 

Form  of  "  First"  or  Credit  Ticket  (New  York)  .  .  .  .178 
Fac-simile  of  "  Small   Ticket "   Deposited  by  Messenger  with 

Settling  Clerk  (New  York) 179 

View  in  Clearing-room,  New  York  Clearing-house.     Clearings 

in  Progress 181 

Form  of  Delivery  Clerk's  Receipts  (New  York)  ....  182 
Form  of  Settling  Clerk's  Statement  (New  York)       .        .        .183 

Form  of  "  Second"  Ticket  (New  York) 185 

Form  of  Proof  Clerk's  Sheet  (New  York) 187 


LIST   OF   ILLUSTRATIONS  xiii 


PAGE 


Form  of  Settling  Clerk's  Report  to  His  Bank  of  Daily  Balances 

(New  York) .        .        .189 

Manager's  Receipt  (New  York) 191 

Form  of  Gold  Certificate — Face  (New  York)  ....  192 
Form  of  Gold  Certificate — Back  (New  York)  ....  193 
Clearings  for  Forty-six  Years — Reproduction  of  a  Table  Issued 

by  the  New  York  Clearing-house 203 

Balances  Paid  in  Money  for  Forty-six  Years — Reproduction  of 

a  Table  Issued  by  the  New  York  Clearing-house   .        .        .  205 
Due  Bill  Used  in  Settling  Runner's  Exchange  by  Philadelphia 

Banks 211 

Clearing-house  Due-bill,  Philadelphia 213 

Form  of  Weekly  Statement  Required  of  Philadelphia  Banks  .  215 
Form  of  Daily  Statement  Employed  by  the  Banks  of  Philadelphia  217 
A  Statement  of  the  Average  Condition  of  Philadelphia  Banks  .  218 
Form  of  Ticket  Used  by  Boston  Banks  for  Notifying  Clearing- 
house Manager  of  Amounts  Paid  in  Making  Settlements  .  234 
Form  of  Weekly  Statement  Employed  by  the  Boston  Banks  .  239 
Form  of  Average  Weekly  Return  in  Use  by  the  Associated  Banks 

of  Boston 240 

Form  of  Statement  of  the  Associated  Banks  of  Boston  .        .        .  241 
Exchange  Ticket,  Foreign  Department,  Boston  Clearing-house  .  253 
Form  of  Foreign  Slip  and  Foreign  Check  Ticket,  Boston  Clear- 
ing-house      255 

Form  of  Receipt,  Foreign  Department,  Boston  Clearing-house  .  257 
Form  of  Letter  of  Transmission  to   Correspondents,   Foreign 

Department,  Boston  Clearing-house 259 

Form  of  Settling  Clerk's  Statement,  Foreign  Department,  Bos- 
ton Clearing-house 261 

Forms  of  Reports  Used  in  Trading  Balances  (Chicago)  .  .  271 
Form  of  Order  Used  in  Transferring  Balances  that  Have  Been 

Loaned  (Chicago) 273 

Form  of  Order  on  Clearing-house  Manager  for  Balance  Due 

(Chicago) 275 

Fac-simile  of  Debit  List  Used  in  St.  Louis  Clearing-house        .  291 


XIV 


LIST    OF    ILLUSTRATIONS 


Form  Used  for  Listing  Balances  in  St.  Louis  Clearing-house 
Form  of   Manager's   Report  of  Clearings,   Balances,   etc.    (St 

Louis)  . 

Form  of  Delivery  Statement  Employed  at  Toronto 
Fac-simile  of  First  Delivery  Voucher  (Toronto)  . 
Fac-simile  of  Second  Delivery  Voucher  (Toronto) 
Form  of  Proof  Used  in  Toronto  Clearing-house  . 
Fac-simile  of  Credit  Voucher  Used  at  Toronto  (black) 
Fac-simile  of  Debit  Voucher  Used  at  Toronto  (red)     . 


PAGE 


309 
311 
313 
315 


CHAPTER   I 

CLASSES   OF  CLEARING-HOUSES 

A  Clearing-house  Defined — Clearing-houses  Classified  with 
Respect  to  Functions— Clearing-houses  Classified  with  Re- 
spect to  the  Funds  Used  in  Settlements. 

What  is  a  clearing-house?  The  Supreme  Court  of  the 
State  of  Pennsylvania  has  defined  it  thus :  "  It  is  an  in- 
genious device  to  simplify  and  facilitate  the  work  of  the 
banks  in  reaching  an  adjustment  and  payment  of  the 
daily  balances  due  to  and  from  each  other  at  one  time  and 
in  one  place  on  each  day.  In  practical  operation  it  is  a 
place  where  all  the  representatives  of  the  banks  in  a  given 
city  meet,  and,  under  the  supervision  of  a  competent  com- 
mittee or  officer  selected  by  the  associated  banks,  settle 
their  accounts  with  each  other  and  make  or  receive  pay- 
ment of  balances  and  so  '  clear '  the  transactions  of  the 
day  for  which  the  settlement  is  made." 

But  we  must  go  farther  than  this,  for  though  originally 
designed  as  a  labor-saving  device,  the  clearing-house  has 
expanded  far  beyond  those  limits,  until  it  has  become  a 
medium  for  united  action  among  the  banks  in  ways  that, 
did  not  exist  even  in  the  imagination  of  those  who  were 
instrumental  in  its  inception.  A  clearing-hGai3Q,\tlier,d- 
fore,  may  be  defined  as  a  device  to  simplify' and  feicilitate. 
the  daily  exchanges  of  items  and  settlement's  of 'baldrices ' 


2  CLEARING-HOUSES 

among  the  banks,  and  a  medium  for  united  action  upon 
all  questions  affecting  their  mutual  welfare. 

The  clearing-houses  in  the  United  States  may  be  di- 
vided into  two  classes,  the  sole  function  of  the  first  of 
which  consists  in  clearing-notes,  drafts,  checks,  bills  of 
exchange,  and  whatever  else  may  be  agreed  upon;  and 
the  second  of  which,  in  addition  to  exercising  the  func- 
tions of  the  class  just  mentioned,  prescribes  rules  and  reg- 
ulations for  the  control  of  its  members  in  various  matters, 
such  as  the  fixing  of  uniform  rates  of  exchange,  interest 
charges,  collections,  etc. 

Clearing-houses  may  also  be  divided  into  two  classes 
with  reference  to  the  funds  used  in  the  settlement  of  bal- 
ances: First,  those  clearing-houses  which  make  their 
settlements  entirely  on  a  cash  basis,  or,  as  stated  in  the 
decision  of  the  Supreme  Court  above  referred  to,  "by 
such  form  of  acknowledgment  or  certificate  as  the  asso- 
ciated banks  may  agree  to  use  in  their  dealings  with  each 
other  as  the  equivalent  or  representative  of  cash;  "  and 
second,  those  clearing-houses  which  make  their  settle- 
ments by  checks  or  drafts  on  large  financial  centres. 


CHAPTER   II 

CLEARING-HOUSE  TERMS 

How  Usages  Differ — The  Meaning  of  '*  To  Clear  " — Clearings 
— Exchange  and  Exchanges — Bills  and  Bills  of  Exchange — 
Draft  and  Check — Accounts  Balanced  and  Balances  in 
Accounts — Collections —  Items— Clearing  -  matter — Settle- 
ments— Out-of-town  Checks  and  Country  Checks. 

Every  profession  and  every  line  of  business,  as  well  as 
every  trade,  develops  its  own  peculiar  terms  and  phrases. 
Those  who  become  familiar  with  the  routine  of  the  busi- 
ness or  the  profession  use  these  terms  ^mong  themselves 
with  a  degree  of  precision  and  certainty  of  meaning 
which  sometimes  is  difficult  for  one  outside  of  the  group 
to  comprehend.  The  usage  in  this  regard  by  banks  and 
clearing-houses  is  no  exception  to  the  general  rule. 

Terms  which  are  current  in  one  part  of  the  country, 
or  in  one  financial  centre,  do  not  always  obtain  in  others, 
and  to  a  certain  extent  different  terms  are  sometimes 
employed  in  different  parts  of  the  country  for  indicating 
approximately  the  same  things.  For  these  reasons,  and 
others  which  the  reader  will  readily  apprehend,  a  brief 
consideration  of  a  few  of  the  prominent  terms  employed 
in  clearing-house  affairs  is  appropriate  by  way  of  intro- 
duction to  the  more  important  chapters  which  follow. 

3 


4  CLEARING-HOUSES 

Nothing  like  a  complete  list  is  attempted,  and  instead  of 
presenting  the  definitions  in  conventional  dictionary 
fashion,  the  meaning  of  certain  terms  and  the  special  uses 
to  which  they  are  applied  are  laid  before  the  reader  in  a 
far  less  formal  manner. 

The  term  "  clearing-house  "  is  defined  at  some  length 
in  another  part  of  this  volume,  from  the  stand-points  of 
use  and  function.  The  word  is  also  used  in  thr^ense  of 
location  or  place.  A  clearing-house  may  be  described 
as  an  office,  established  by  the  banks  of  a  city,  where  their 
representatives  meet  daily,  to  exchange  drafts  and  checks, 
and  adjust  balances. 

The  term  "  to  clear  "  is  popularly  defined  "  to  pass 
through  the  clearing-house."  Another  definition  is,  "  to 
settle  accounts  by  exchange  of  bills  and  checks,  as  is  done 
in  the  clearing-house."  To  clear  a  check  means  to  pass 
it  from  the  bank  that  holds  it  as  a  deposit  or  for  collec- 
tion, to  the  bank  on  which  it  is  drawn,  and  to  receive  pay- 
ment therefor;  but,  with  the  complexities  of  modern 
business,  a  single  check  is  seldom  cleared.  Instead,  a 
multitude  of  checks  and  other  items  are  included  in  each 
clearing.  The  term  *'  to  clear,"  therefore,  takes  on  a 
broader  meaning,  and  the  only  adequate  conception  of 
it  is  afforded  by  a  view  of  the  actual  operations  of  a  clear- 
ing-house, which  are  set  forth  in  another  part  of  this 
volume. 

The  word  "  clearing  "  designates  the  settlement  of  bal- 
ances between  banks,  arising  from  the  interchange  of 
checks,  drafts,  etc.,  carried  on  at  the  clearing-house.  The 
term  "  clearings  "  signifies  the  total  of  differences  bal- 
anced   at   a   clearing-house.      Occasionally    the    words 


CLEARING-HOUSE    TERMS  5 

"  clearance "  and  "  clearances,"  which,  properly  em- 
ployed, designate  space  or  distance,  are  used  in  the  place 
of  "  clearing  "  and  ''  clearings."  Their  employment  in 
the  place  of  the  latter  is  not  justified  by  general  usage 
nor  by  the  real  meaning  of  these  forms  of  the  word. 

The  term  ''  exchange,"  so  common  in  financial  and 
business  transactions,  has  various  shades  of  meaning, 
ranging  from  a  charge  for  the  transfer  of  money  from  one 
point  to  another,  to  the  place  where  business  interests  of 
a  special  class  are  brought  together  and  where  contracts 
concerning  them  are  made.  The  word  literally  means 
the  act  of  giving  one  thing  as  an  equivalent  for  another, 
or  for  interchanging  two  equivalents.  From  this  it  comes 
that  the  word  indicates  that  which  is  given  or  received 
by  an  arrangement  for  mutual  interchange,  and  hence 
the  term  "  exchanges,"  frequently  employed  by  those 
who  have  transactions  with  the  clearing-house,  to  indi- 
cate the  items  that  are  to  be  exchanged,  as,  for  example, 
in  the  phrase :  "  The  amount  of  exchanges." 

The  term  '*  bill  "  has  several  different  meanings,  rang- 
ing from  a  statement  of  an  account,  or  of  money  due,  to 
a  bank-note  or  government  note.  Occasionally,  in  loose 
usage,  it  means  a  promissory  note.  In  Great  Britain  the 
term  is  frequently  used  to  mean  a  bill  of  exchange.  As 
used  in  connection  with  clearing-house  affairs  in  this 
country,  it  usually  designates  bank-notes  or  government 
notes. 

A  "  bill  of  exchange  "  is  a  written  order  or  request  from 
one  person  to  another,  for  the  payment  of  money  to  a 
third,  the  amount  to  be  charged  to  the  drawer  of  the  bill. 
This  term,  therefore,  while  having  a  special  meaning  in 


6  CLEARING-HOUSES 

some  cases,  often  includes  drafts  which  are  drawn  by 
merchants  upon  their  customers  in  ordinary  course  and 
put  through  bank  for  collection.  The  term  in  this  sense, 
however,  is  less  commonly  employed  than  "  draft." 

A  ''  draft  "  may  be  described  as  an  order  drawn  by  one 
party  on  another,  for  the  payment  of  money  to  a  third. 
It  is  for  the  most  part  limited  to  an  order  payable  at,  or 
collectable  through,  a  bank  or  other  financial  agency.  A 
draft  made  payable  at  some  time  other  than  at  sight,  and 
which  has  been  accepted  by  the  party  upon  whom  it  is 
drawn,  is  known  as  an  "  acceptance,"  and  is  treated  by 
banks  and  clearing-houses  the  same  as  a  note. 

A  "  check  "  is  an  order  in  writing  upon  a  bank  or 
banker  for  the  payment  of  a  designated  amount  of  money 
to  some  designated  person  or  order.  Checks  vary  in 
form.  Those  which  are  current  between  banks  and  bank- 
ers, as,  for  example,  the  checks  that  would  be  used  by  a 
country  bank  in  drawing  against  the  balance  lodged  with 
its  New  York  correspondent,  frequently  take  the  form 
that  commonly  obtains  with  drafts.  Hence  the  term 
"  bank-draft "  or  ''  banker's-draft,"  often  employed  by 
those  who  purchase  New  York  or  other  exchange  of 
their  local  banks,  to  designate  the  character  of  their  re- 
mittance. 

A  "  centre  "  is  described  as,  in  the  dictionaries,  the 
place  about  which  things  cluster,  or  to  which  they  con- 
verge. It  is  also  described  as  the  point  of  emanation  or 
radiation.  With  this  definition  before  us,  it  is  easy  to 
perceive  what  is  meant  by  a  "  money  centre  "  or  a  "  finan- 
cial centre." 

The  term  "  balance  "  has  two  distinct  meanings,  and 


CLEARING-HOUSE   TERMS  *j 

the  word  is  used  among  bankers  and  business  men  in  a 
way  to  indicate  two  things  entirely  different  from  each 
other.  In  its  simplest  form  a  balance  may  be  declared  to 
be  an  equality  between  the  credit  and  debit  totals  of  an 
account.  But  it  is  also  used  to  refer  to  the  difference  be- 
tween such  totals,  or,  in  other  words,  the  excess  on  one 
side  or  the  other.  Thus  in  the  first  sense  we  declare  that 
an  account  is  balanced  when  it  has  been  closed  by  secur- 
ing an  equality  of  the  two  sides.  In  the  second  sense, 
when  we  speak  of  the  balance  in  an  account,  we  mean 
either  the  debit  or  credit  amount,  as  the  case  may  be, 
that  is  required  to  produce  an  equality  of  the  two  sides, 
or,  in  other  words,,  to  close  the  account.  The  balances 
in  a  clearing-house  statement  are  the  respective  differ- 
ences between  the  debit  and  credit  sides  of  the  several 
accounts  included  in  the  statement.  A  bank's  balance  in 
a  clearing-house  settlement  would  mean  either  the 
amount  that  it  has  to  pay,  or  the  amount  that  it  is  to 
receive,  according  to  the  excess  of  debits  or  credits  shown 
by  the  statement. 

The  dictionaries  define  the  verb  ''  to  collect "  as  fol- 
lows :  "  To  gather  money  from  many  people."  A  col- 
lection is  defined  as  ''  that  which  has  been  gathered  or 
taken  up;  "  but  among  the  banks  and  in  clearing-house 
circles  the  term  "  collection  "  is  somewhat  expanded  be- 
yond these  limitations,  and  is  used  for  designating  that 
which  is  to  be  collected.  For  example,  the  drafts  or  bills 
of  exchange  which  a  bank  holds  at  a  given  date  are  fre- 
quently designated  as  its  "  collections,"  particularly  at 
the  time  that  they  are  being  arranged  in  proper  order  for 
transmission  to  its  correspondents  or  for  delivery  to  the 


8  CLEARING-HOUSES 

clearing-house.  Sometimes  the  term  employed  in  such 
cases  is  "  collection  items,"  which,  of  course,  means  the 
items  for  collection. 

An  **  item,"  as  the  term  is  generally  understood, 
means  a  separate  article  or  entry  in  an  account  or 
schedule,  or  a  sum  so  entered.  The  term  among  banks 
and  in  clearing-houses  is  used  in  the  latter  sense  almost 
literally.  An  item  is  that  of  which  an  entry  has  been 
made,  whether  it  is  a  draft,  bill  of  exchange,  check,  or 
note. 

The  word  is  frequently  employed  in  combination  with 
a  qualifying  term,  as,  for  example,  ''  collection  items," 
"  out-of-town  items,"  "  city  items,"  etc. 

A  term  which  is  as  nearly  original  with,  and  peculiar  to, 
clearing-houses  as  any  that  might  be  cited,  is  **  clearing- 
matter."  ''  Matter,"  in  this  phrase,  is  a  collective  term, 
and  designates  any  and  all  of  the  items  that  go  into  a 
clearing-house.  Clearing-matter  then  means  that  col- 
lection of  items,  however  assorted,  which  may  be  cleared. 
"  Acceptable  clearing-matter "  would  designate  that 
which  is  acceptable,  according  to  the  rules  of  the  clear- 
ing-house. There  would,  of  course,  be  the  opposite  or 
negative  term,  for  example,  "  unacceptable  matter," 
meaning  that  which,  while  having  somewhat  of  the  char- 
acter of  clearing-matter,  is  not  of  a  kind  that  is  handled 
by  the  clearing-house  in  question,  under  the  rules  gov- 
erning its  operation. 

A  settlement,  in  ordinary  commercial  afifairs,  is  an  ad- 
justment of  accounts.  "  To  settle  "  means  to  liquidate, 
or  to  pay,  or  to  adjust  differences.    A  **  settlement  "  may 


■r    \ 

CLEARING-HOUSE   TERMS  .a 

mean  either  the  act  of  settHng,  or  that  which  is  accom- 
plished by  settHng.  A  bank's  clearing-house  settlement 
therefore  means  an  adjustment  or  payment  of  the  differ- 
ence between  the  debit  and  credit  side  of  the  account, 
and  further  designates  either  a  receipt  or  a  disbursement, 
as  the  case  may  be.  Each  member-bank  has  a  settlement 
with  its  clearing-house  daily. 

In  the  designation  of  checks,  with  respect  to  the  loca- 
tion of  the  banks  upon  which  they  are  drawn,  consider- 
able confusion  exists  at  times  in  the  term  employed  for 
the  purpose.  ''  Personal  check  "  and  "  local  check  "  are 
terms  occasionally  used  to  indicate  out-of-town  checks 
or  checks  on  country  banks.  An  out-of-town  check  is 
one  drawn  upon  any  bank  outside  of  the  city  in  which  a 
given  clearing-house  is  located,  or  outside  of  the  city  in 
which  member-banks  of  the  given  clearing-house  are 
situated.  In  other  words,  it  is  one  that  must  be  sent  away 
for  collection.  The  term  **  country  check  "  has  the  same 
general  meaning,  but  is  applied  more  particularly  to 
checks  drawn  upon  banks  located  at  a  considerable  dis- 
tance from  a  given  clearing-house  centre.  Referring 
again  to  the  terms  ''  personal  check  "  and  "  local  check," 
above  referred  to,  it  must  be  evident  to  everyone  who 
gives  the  matter  the  least  thought,  that  a  check  drawn  by 
a  depositor  on  a  bank  in  New  York  would  be  a  local 
check,  and  that  it  also  would  be  a  personal  check,  and 
yet  such  a  check,  issued  in  the  regular  course  of  business, 
is  not  objectionable  from  any  point  of  view.  On  the  other 
hand,  a  check  drawn  by  a  merchant  in  an  interior  town 
upon  a  bank  in  that  town,  irrespective  of  the  responsi- 


lO  CLEARING-HOUSES 

bility  of  the  drawer  or  the  standing  of  the  bank  upon 
which  it  is  drawn,  would  also  be  a  personal  check;  but 
the  latter  would  not  represent  par  funds  in  New  York. 
Out-of-town  checks  and  country  checks,  accordingly,  are 
subject  to  special  regulations  with  respect  to  costs  of  col- 
lection. 


CHAPTER  III 

SPECIAL  FUNCTIONS  OF  A  CLEARING-HOUSE 

Primary  Object — Extension  of  Field— List  of  Special  Func- 
tions— Action  of  Clearing-house  Banks  at  Outbreak  of  the 
Civil  War — Mutual  Assistance  of  Members — Fixing  Rates 
of  Interest  on  Deposits — The  Practice  in  Sioux  City — 
Establishing  Rates  of  Exchange — Some  Buffalo  History — 
Rochester  —  Baltimore  —  Houston — Toledo — Topeka — St. 
Louis— Denver— West  Superior— St.  Joseph— Clearing- 
house Loan  Certificates. 

The  primary  object  of  a  clearing-house  is  the  exchange 
of  checks  and  drafts  between  the  banks  associated  to- 
gether for  that  purpose,  and  the  settlement  of  balances 
resulting  from  such  exchanges;  but  this  is  not  the  only 
function  exercised.  As  already  shown,  this  single  func- 
tion constitutes  a  clearing-house  of  the  first  class,  while 
the  addition  of  other  functions  puts  the  organization  into 
another  class.  The  tendency  has  been  marked,  especially 
in  recent  years,  to  include  within  the  legitimate  field  of 
clearing-houses  all  questions  affecting  the  mutual  wel- 
fare of  the  banks  and' the  community  as  a  whole.  The 
bankers  west  of  the  Mississippi  River  have  given  to  the 
country  the  most  striking  examples  of  the  possibilities 
of  clearing-houses  exercising  various  special  functions, 
while  the  great  associations  of  the  East,  and  especially 


12  CLEARING-HOUSES 

that  of  New  York,  have  exempHfied  the  utility  and  value 
of  clearing-house  loan  certificates. 

The  most  important  of  the  special  functions  of  a  clear- 
ing-house are  (a)  the  extending  of  loans  to  the  govern- 
ment; (b)  mutual  assistance  of  members;  (c)  fixing  uni- 
form rates  of  interest  on  deposits;  (d)  fixing  uniform 
rates  of  exchange  and  of  charges  on  collections,  and  (e) 
the  issue  of  clearing-house  loan  certificates. 

Less  than  a  decade  after  the  inauguration  of  the  clear- 
ing-house system  in  America,  the  Civil  War  broke  out, 
and  threw  the  government  into  a  condition  of  acute  finan- 
cial embarrassment.  The  ordinary  sources  of  income 
were  insufficient  to  meet  the  demands  of  the  approaching 
crisis.  Thereupon  the  banks,  members  of  the  clearing- 
houses in  New  York  and  Boston,  responded  with  practi- 
cal unanimity  to  the  call  of  the  government  for  loans,  by 
which  the  latter  was  enabled  to  put  armies  in  the  field 
and  maintain  the  struggle  for  national  unity. 

In  times  of  panic  it  is  not  infrequently  the  case  that  a 
bank  in  good  standing  becomes  temporarily  embarrassed. 
Unfortunate  report  may  cause  a  run  upon  it,  and,  being 
unable  to  call  in  a  sui^cient  amount  of  its  outstanding 
loans  to  meet  the  demands  of  its  frightened  depositors, 
it  must  either  secure  a  loan  or  fail.  In  such  an  emergency 
the  other  members  of  the  clearing-house  are  usually  will- 
ing to  render  assistance  until  the  strain  is  relaxed.  To 
secure  such  aid,  however,  a  bank  must  be  sound  in  its 
management  and  of  good  repute  in  every  respect.  Other- 
wise, the  members  of  the  clearing-house  are  likely  to  de- 
cline assistance,  being  quite  willing  to  get  rid  of  a  weak 
and  ill-managed  member. 


FUNCTIONS    OF    A    CLEARING-HOUSE 


13 


Another  of  the  special  functions  of  a  clearing-house  is 
the  fixing  of  uniform  rates  of  interest  on  deposits.  In 
some  associations  the  legality  of  such  action  is  still  re- 
garded as  a  moot  question,  and  hence  they  are  reluctant 
to  enforce  such  a  rule.  Other  associations,  however,  have 
not  hesitated  to  regulate  the  members  on  this  point.  As 
early  as  1881,  rates  on  interest  were  agreed  upon  in  Buf- 
falo, and  were  observed,  practically  without  fraction  or 
violation,  for  some  nine  years  thereafter.  They  were 
broken  at  last  only  because  of  their  non-observance  by 
new  banks,  which  at  the  outset  refused  to  become  mem- 
bers of  the  clearing-house  organization. 

The  Sioux  City,  la..  Clearing-house  Association  has 
fixed  a  maximum  rate  of  interest  of  three  per  cent,  per 
annum,  to  be  paid  by  the  members  upon  bank  accounts 
or  balances,  when  the  balances  amount  to  one  thou- 
sand dollars  or  more;  and  a  minimum  rate  on  loans 
or  re-discounts  to  banks  of  eight  per  cent.  At  St.  Jo- 
seph, Mo.,  interest  may  be  allowed  to  country  banks 
at  the  rate  of  three  per  cent,  per  annum  upon  the 
amount  remaining,  after  deducting  for  an  average  bal- 
ance of  two  thousand  dollars  per  day.  No  member 
can  pay  interest  on  any  bank  account  when  the  bal- 
ance averages  less  than  two  thousand  dollars  a  day.  In- 
terest at  the  rate  of  three  per  cent,  per  annum  may  be 
allowed  to  any  bank  in  the  city,  or  to  those  individuals 
specified  in  the  rules.  No  interest  can  be  paid  on  any 
account  except  as  specified  in  the  rules,  but  it  is  under- 
stood that  the  city,  county,  and  State  are  exempted  from 
all  interest  rules,  and  any  member  may  pay  any  rate  of 
interest  agreed  upon  on  such  public  accounts.    Interest 


14  CLEARING-HOUSES 

may  be  allowed  upon  certificates  of  deposits  at  a  rate  not 
to  exceed  four  per  cent,  per  annum  for  six  months'  time, 
and  five  per  cent,  per  annum  for  twelve  months'  time. 
The  certificates  must  state  positively  whether  the  money 
is  left  for  six  or  twelve  months.  No  interest  is  payable 
for  parts  of  a  month.  Deposits  made  on  or  before  the 
third  of  any  month  may  draw  interest  from  the  first  of 
the  month. 

Still  another  of  the  special  functions  of  a  clearing-house 
is  the  fixing  of  uniform  rates  of  exchange,  and  of  charges 
on  the  collection  of  items.  In  1881,  the  year  in  which  the 
clearing-house  in  Buffalo  was  organized,  a  prominent 
banker  in  that  city  succeeded  in  uniting  the  banks  on 
rates.  The  promoter  of  the  enterprise,  though  well 
known  for  rate-cutting,  was  a  successful  banker  and  had 
always  been  able  to  meet  competition  successfully. 
Hence,  when  he  proposed  a  uniform-rate  system,  the 
other  banks  were  only  too  glad  to  consider  his  proposi- 
tions. Meetings  were  accordingly  held,  schedules  of 
charges  were  drawn  up,  and  rules  were  formulated  for 
the  guidance  of  the  banks.  In  a  short  time  a  schedule 
was  adopted  and  put  in  successful  operation.  The  rates 
were  not  high,  but  were  arranged  so  as  to  do  justice,  as 
far  as  possible,  to  the  banks  on  the  one  hand  and  the 
depositors  on  the  other,  and  so  satisfactory  was  the  new 
regime  that  it  remained  in  harmonious  operation  for 
nearly  nine  years.  It  is  said  that  the  increase  in  profits 
or  collections,  to  the  twelve  banks  interested,  over  the 
former  method  of  doing  business  free  of  charge,  paid  the 
dividends  of  all  the  banks  each  year,  and  whatever  profit 
was  made  on  loans  and  discounts  was  used  to  build  up 


FUNCTIONS    OF    A    CLEARING-HOUSE  15 

the  surplus.  But  the  formation  of  new  banks  finally 
played  havoc  with  the  uniform-rate  system.  While  it 
lasted  it  was  made  obligatory  upon  every  bank,  but  in 
1 89 1  the  newly  organized  banks  began  to  cut  on  rates. 
The  clearing-house  members  endeavored  to  induce  the 
new  banks  to  join  the  association,  but  did  not  at  first  suc- 
ceed. It  was  regarded  as  unjust  to  the  member-banks 
to  hold  them  to  the  existing  agreement  when  their  com- 
petitors were  free,  and  accordingly,  in  June,  1891,  the 
schedule  of  rates  was  made  no  longer  obligatory. 

In  1895  the  Rochester,  N.  Y.,  Clearing-house  Asso- 
ciation put  in  operation  a  schedule  of  collection  charges, 
and  the  results  have  been  most  satisfactory.  AH  of  the 
banks  were  in  favor  of  it,  but  there  was  at  first  some  com- 
plaint on  the  part  of  customers.  The  rates  for  remit- 
tances of  city  items  were  fixed  at  a  meeting  of  the  asso- 
ciation early  in  the  year  1895,  as  follows:  Minimum 
charge,  ten  cents;  from  one  hundred  dollars  to  one  thou- 
sand dollars,  one-tenth  of  one  per  cent.;  from  one  thou- 
sand dollars  to  two  thousand  dollars,  one  dollar;  over  two 
thousand  dollars,  one-twentieth  of  one  per  cent. ;  par  re- 
mittances to  be  made  weekly.  Provision  was  made  for 
a  fine  of  one  thousand  dollars  upon  any  member  failing 
to  observe  the  rates;  two  hundred  and  fifty  dollars  of 
this  fine  is  to  be  paid  to  the  party  giving  the  information. 

On  the  first  day  of  February,  1897,  a  rule  went  into 
force  at  Baltimore,  requiring  the  members  to  charge  and 
collect  without  rebate,  from  all  individuals,  firms,  or  cor- 
porations, residing  in  the  city,  who  might  thereafter  be- 
come new  depositors  or  customers  of  the  banks  which  are 
members  of  the  association,  such  minimum  rates  of  ex- 


1 6  CLEARING-HOUSES 

change  on  checks,  drafts,  notes,  and  acceptances,  pay- 
able out  of  the  city,  as  are  named  in  schedules  to  be 
furnished  from  time  to  time  by  an  exchange  committee 
of  the  clearing-house.  The  penalty  for  violation  of  this 
rule  is  expulsion  from  the  association,  provided  a  major- 
ity of  the  members  vote  in  favor  thereof. 

At  a  meeting  of  the  Houston,  Tex.,  Clearing-house 
Association,  March  9,  1897,  the  following  resolutions 
were  unanimously  adopted :  ''  Owing  to  the  fact  that 
banks  in  certain  cities  of  this  State  are  uniformly  charg- 
ing the  banks  of  Houston  exchange  on  all  collections  not 
reading  '  with  exchange,'  bearing  indorsements  of  banks 
outside  the  State;  therefore  be  it 

"  Resolved  by  the  Houston  Clearing-house  Associa- 
tion, that  all  its  members  will  hereafter,  as  a  matter  of 
self-protection,  charge  the  current  rate  of  exchange  upon 
all  collections  received  from  banks  located  in  any  city 
where  the  foregoing  rule  is  in  effect,  and  which  may 
bear  the  indorsement  of  any  bank  or  banker  outside  of 
Texas,  or  originating  outside  of  the  State. 

"  Resolved,  that  this  resolution  take  effect  on  and  after 
April  I,  1897." 

In  the  latter  part  of  Rule  5  of  the  Articles  of  Associa- 
tion of  the  Toledo,  O.,  Clearing-house,  it  is  provided 
as  follows :  "  It  shall  also  be  in  the  power  of  such  com- 
mittee (the  committee  of  management)  to  fix  rates  of 
charges  on  items  outside  the  city  and  charges  for  drafts 
or  currency  from  time  to  time,  if  deemed  advisable,  and 
change,  revise,  or  suspend  the  same  as  circumstances 
require." 

In  the  Constitution  of  the  Topeka,  Kan.,  Clearing- 


FUNCTIONS    OF    A    CLEARING-HOUSE  17 

house  Association,  the  rules  on  rates  for  collection  are 
as  follows : 

"  Rates  for  collection  whether  made  or  not :  Collec- 
tion payment  in  advance  up  to  fifty  dollars,  ten  cents 
each  item;  fifty  dollars  to  one  hundred  dollars,  fifteen 
cents  each  item;  one  hundred  dollars  and  upward, 
twenty-five  cents  each  item.  Collections  on  agricultural 
implement  paper,  twenty-five  cents  each  item.  All  drafts 
drawn  with  bill  of  lading  attached,  whether  cash  items  or 
not,  twenty-five  cents  each  item;  and  if  cash  is  advanced 
on  the  same,  not  less  than  ten  cents  per  hundred  or  one 
dollar  per  thousand.  Rates  of  exchange  on  drafts  and 
collections  drawn  with  exchange  shall  be  made  at  not  less 
than  fifteen  cents  up  to  fifty  dollars;  twenty-five  cents  up 
to  one  hundred  dollars,  and  ten  cents  for  each  additional 
hundred.  The  above  charges  shall  not  apply  to  col- 
lections not  drawn  with  exchange,  received  from  bank 
correspondents  who  do  not  charge  collecting  bank  on 
like  items." 

The  Clearing-house  Association  at  St.  Louis  has  in 
force  a  most  successful  system  of  collection  charges.  The 
new  rules  became  operative  March  i,  1895,  and  are 
obligatory  upon  all  the  banks,  members  of  the  Clear- 
ing-house Association,  and  upon  all  banks  and  trust 
companies  making  their  clearings  through  the  clearing- 
house. Under  this  regime  every  bank  and  trust  com- 
pany, whether  a  member,  or  clearing  through  a  member, 
is  required  to  charge  for  all  items  received  from  St.  Louis 
city  customers,  and  passed  direct  to  their  credit,  or  cashed 
for  any  resident  of  the  city,  not  less  than  one-tenth  of  one 
per  cent,  of  the  amount  of  the  item,  and  if  said  per  cent. 


1 8  CLEARING-HOUSES 

does  not  amount  to  fifteen  cents,  the  charge  must  not  be 
less  than  that  sum.  It  is  understood,  however,  that  all 
items  received  at  any  one  time  from  any  customer,  and 
payable  at  one  place,  may  be  added  together  and  charged 
for  as  if  they  were  one  item.  This  schedule  applies  to 
that  section  of  the  United  States  bounded  by  North 
Carolina,  Tennessee,  and  Arkansas  on  the  south,  and 
North  Dakota,  South  Dakota,  Nebraska,  and  Kansas  on 
the  west.  In  all  the  rest  of  the  States  and  Territories  a 
charge  must  be  made,  amounting  to  not  less  than  one- 
fourth  of  one  per  cent,  of  the  amount  of  the  item,  and  if 
said  per  cent,  when  calculated  upon  any  such  item  does 
not  equal  fifteen  cents,  the  charge  must  not  be  less  than 
that  sum;  but  it  is  understood,  as  before,  that  all  items 
received  at  any  one  time,  from  any  customer,  and  payable 
at  one  place,  may  be  added  together  and  treated  as  one 
item.  On  all  such  items  drawn  with  exchange  the  charge 
is  one-half  of  the  foregoing  rates,  except  those  upon 
which  the  charge  of  fifteen  cents  is  made. 

It  is  discretionary  with  each  bank  and  trust  company 
as  to  the  charge  on  items  drawn  on  the  cities  of  New 
York,  Brooklyn,  Jersey  City,  Boston,  Philadelphia,  Balti- 
more, Chicago,  Cincinnati,  Louisville,  and  New  Orleans, 
and  bank-drafts  on  banks  in  Kansas  City,  Mo.  Each 
bank  and  trust  company,  member  of  or  connected  with 
the  clearing-house,  is  required  to  collect  the  foregoing 
charges  on  all  items  not  later  than  the  third  day  of  the 
calendar  month  next  following  the  receipt  or  handling 
of  the  item,  or  issuance  of  the  draft  or  check,  and  no  such 
bank  or  trust  company  is  permitted  to  allow,  either  di- 
rectly or  indirectly,  any  rebate  or  return  of  any  such 


FUNCTIONS    OF    A    CLEARING-HOUSE  19 

charges,  or  to  make  in  any  form,  whether  of  favor  or 
otherwise,  any  compensation  therefor. 

The  violation  of  any  of  these  rules  by  any  bank  or  trust 
company  clearing  through  a  member,  would  deprive  the 
same  of  its  connection  with  the  association,  and  work 
the  forfeiture  of  its  rights  and  privileges  in  the  clearing- 
house. For  a  similar  offence  any  member  would  be  ex- 
pelled on  a  three-fourths  vote  in  favor  thereof. 

The  Denver,  Col.,  Clearing-house  Association  has 
rules  regarding  collection  charges,  which  went  into  oper- 
ation October  i,  1897.  These  rules  require  that  all 
checks,  drafts,  or  other  items  deposited  by  corporations, 
firms,  or  individuals,  or  presented  for  negotiation,  not 
drawn  on  or  payable  in  certain  leading  cities  throughout 
the  United  States,  as  specified  in  the  rules,  shall  be  dis- 
counted, the  rate  to  be  not  less  than  fifteen  cents  per  one 
hundred  dollars  or  fraction  thereof,  and,  in  addition 
thereto,  the  cost  of  collecting  the  same.  On  collections 
payable  with  exchange,  a  charge  of  one-tenth  of  one  per 
cent,  is  collected  from  the  payer  of  the  collection,  and  in 
case  of  refusal  to  pay  exchange,  payment  of  the  collection 
is  not  received.  No  collection  is  made  for  less  than  ten 
cents. 

At  West  Superior,  Wis.,  a  regular  system  of  rates  of 
charges  on  collections  is  enforced.  On  collections  out  of 
town  a  charge  is  made  of  twenty-five  cents  per  one  hun- 
dred dollars  or  under,  and  ten  cents  for  each  additional 
one  hundred  dollars  or  fraction  thereof.  A  similar  charge 
is  imposed  for  remitting  for  collection  in  the  city  or  else^ 
where. 

The  clearing-house  at  St.  Joseph,  Mo.,  is  sui  generis. 


20  CLEARING-HOUSES 

No  Other  association — not  even  the  one  at  St.  Louis — 
approaches  it  in  the  detail  with  which  it  has  worked  out 
a  system  of  regulations  governing  the  conduct  of  its  mem- 
bers. On  all  items,  except  in  certain  cities  specified, 
credited  or  cashed  for  city  customers,  a  charge  of  fifteen 
cents  is  made  on  each  one  hundred  dollars  or  fraction 
thereof,  no  charge  being  made  at  less  than  fifteen  cents. 
Upon  all  items  drawn  upon  points  in  nearly  all  the  States 
west  of  the  Mississippi  River,  a  charge  is  made  of  twenty- 
five  cents  per  one  hundred  dollars  or  fraction  thereof. 
Items  upon  Denver,  New  Orleans,  and  Memphis  are 
charged  upon  at  the  rate  of  fifteen  cents  per  one  hundred 
dollars.  On  all  out-of-town  items  left  for  collection,  a 
charge  of  fifteen  cents  per  one  hundred  dollars  or  fraction 
thereof  is  made,  in  addition  to  the  actual  cost  of  collec- 
tion. A  charge  of  one  dollar  for  one  thousand  dollars  is 
made  on  all  St.  Joseph  items  collected  for,  or  bearing  the 
indorsement  of  banks  on  and  east  of  the  Mississippi 
River,  and  other  out-of-town  customers,  except  regular 
country  correspondents.  On  all  out-of-town  items  a 
charge  is  made  of  one  dollar  per  one  thousand  dollars, 
over  and  above  the  cost  of  collecting.  On  all  checks  and 
other  items  received  from  St.  Louis,  points  south  of  that 
city,  and  from  all  points  east  of  the  Mississippi  River, 
drawn  on  St.  Joseph,  and  all  points  west  of  the  Missis- 
sippi River,  a  charge  of  one-tenth  of  one  per  cent.,  in  ad- 
dition to  the  cost  of  collecting,  is  levied,  for  credit  made 
or  exchange  returned  therefor.  Drafts  drawn  by  country 
correspondents  on  members  of  the  association  may  be 
excepted  from  this  rule.  On  all  items  received  from 
country  correspondents,  bearing  the  indorsement  of  St. 


FUNCTIONS    OF    A    CLEARING-HOUSE  2 1 

Louis,  or  any  point  east  of  the  Mississippi  River,  a  charge 
is  made  of  not  less  than  ten  cents  per  one  hundred  dollars. 
For  violation  of  any  of  the  rules  of  the  association,  the  of- 
fending member  is  liable  to  a  fine  of  one  thousand  dol- 
lars, and  may  also  be  expelled  from  the  association  by  a 
two-thirds  vote  of  all  the  members. 

In  addition  to  the  functions  we  have  just  described,  we 
may  mention  the  regulation  of  premium  on  exchange,  the 
cost  of  transfers  by  wire,  and  the  limitations  to  the  de- 
posits of  city  customers. 

Each  member  of  the  St.  Joseph  Clearing-house  is  al- 
lowed to  submit  a  list  of  the  names  of  jobbers  doing  busi- 
ness in  the  city  to  whom  it  may  sell  exchange  at  the  rate 
of  not  less  than  fifty  cents  per  one  thousand  dollars.  The 
St.  Louis  Clearing-house  makes  a  like  charge  to  any 
party  taking  a  draft  or  a  check  drawn  by  any  bank  or 
trust  company,  member  of  or  connected  with  the  Clear- 
ing-house Association,  on  New  York,  Boston,  or  Phila- 
delphia. If  the  premium  thus  estimated  on  the  amount 
of  any  draft  or  check  does  not  equal  fifteen  cents,  then 
the  charge  on  that  item  must  be  that  sum.  But  this  rule 
does  not  apply  to  the  purchase  and  sale  of  exchange  be- 
tween members  of  the  clearing-house  or  institutions 
clearing  through  members. 

Upon  all  transfers  by  telegraph  by  any  member  of  the 
Denver  Clearing-house  Association,  a  charge  of  one  per 
cent,  is  made  up  to  one  thousand  dollars,  and  one-eighth 
of  one  per  cent,  above  that  amount,  but  on  a  transfer  of 
one  thousand  dollars  to  two  thousand  dollars  a  charge 
must  be  made  of  not  less  than  two  dollars  and  fifty  cents. 
Transfers  by  telegraph  for  city  customers  may  be  made 


22  CLEARING-HOUSES 

by  members  of  the  St.  Joseph  Clearing-house  for  two 
dollars  per  one  thousand  dollars,  in  addition  to  the  cost  of 
the  telegram.  For  banks,  a  charge  for  transfers  must  be 
made  of  not  less  than  one  dollar  per  one  thousand  dollars, 
in  addition  to  the  cost  of  the  telegram. 

The  position  recently  taken  by  the  New  York  Clearing- 
house in  the  matter  of  collecting  out-of-town  items, 
should  be  referred  to  in  this  connection.  It  is  discussed 
in  another  chapter,  to  which  the  reader  is  referred.  The 
same  remark  applies  to  the  foreign  department  of  the 
Boston  Clearing-house,  recently  organized,  which  is 
likewise  presented  in  another  chapter. 

The  last  of  the  important  special  functions  of  the  clear- 
ing-house, to  which  attention  will  be  called,  is  the  issue 
of  clearing-house  Joan, certificates  in  times  of  panic.  By 
this  means,  in  some  cases,  the  specie  reserves  of  the  clear- 
ing-house members  have  been  combined  in  a  way  to  be- 
come a  common  fund,  so  that  any  bank  which  experi- 
enced an  unusual  demand  for  specie  was  supported  by  the 
combined  reserves  of  all  the  banks.  The  bank  thus  as- 
sisted secures  the  other  members  against  loss,  by  de- 
positing with  a  committee,  appointed  for  the  purpose  of 
receiving  them,  its  securities  in  th^shape  of  stocks,  bonds, 
and  bills  receivable.  So  importanTare  the  history,  meth- 
ods, and  results  of  this  remarkable*  device,  that  special 
chapters  are  necessary  for  their  exposition.  ^ 


CHAPTER   IV 

POSSIBLE   DEVELOPMENTS  OF  ^HE   CLEARING- 
HOUSE SYSTEM 

New  Functions  to  be  Exercised — Country  Checks — Transfer  of 
Currency  from  Point  to  Point — Possible  Use  of  Gold  Cer- 
tificates—  Special  Examiners — Settlement  of  Balances — 
Advantages  of  the  Cash  Basis  —  Clearing-house  Deposi- 
tories— 1  he  Use  of  Depository  Certificates. 

The  clearing-house  system  is  becoming  a  definitely 
recognized  power  in  the  financial  methods  of  the  United 
States.  It  is  as  yet  in  its  infancy,  and  the  powers  that 
the  various  clearing-houses  possess  are  capable  of  devel- 
opment and  expansion  to  an  indefinite  degree.  The 
clearing-house,  which  was  begun  simply  as  a  labor-saving 
device,  has  united  the  banking  interests  of  various  com- 
munities in  closer  bonds  of  sympathy  and  union,  and  has 
developed  into  a  marvellous  instrumentality  for  the  pro- 
tection of  the  community  from  the  evil  effects  of  panics 
and  of  bad  banking.  Clearing-houses  are  gradually  be- 
coming a  welding  force  that  ultimately  will  bring  to  the 
banking  business  of  this  country  the  centralization  which 
it  so  greatly  needs.  In  the  course  of  time,  rates  for  money 
in  the  United  States  will  become  more  and  more  on  a 
par  with  those  prevailing  in  European  money  centres, 

and  then  the  clearing-houses  of  the  various  financial  cen- 

23 


24  CLEARING-HOUSES 

tres  of  this  country  will  be  obliged  to  undertake  functions 
which  as  yet  they  have  only  discussed. 

As  money  rates  decrease,  losses  from  bad  debts  must 
be  brought  to  a  minimum,  and  the  question  of  a  central 
agency,  which  shall  disseminate  information  regarding 
paper  outstanding  among  the  banks,  must  and  will  re- 
ceive the  attention  it  deserves. 

^  The  payment  of  uniform  rates  of  interest  on  bank  de- 
posits has  already  been  taken  up  by  some  of  the  associa- 
tions, and  will  in  due  time  receive  the  same  careful  at- 
tention here  that  is  accorded  it  in  London.  The  time  is 
near  at  hand  when  the  banks  that  are  members  of  clear- 
ing-houses will  be  obliged  to  sink  their  differences,  and, 
by  agreement,  regulate,  monthly  or  quarterly,  the  rate  of 
interest  to  be  paid,  this  rate  to  be  subject  to  change,  ac- 
cording to  varying  conditions  of  the  money  market. 

^More  careful  supervision  over  the  establishment  of  new 
institutions  will  be  necessary,  and  the  regulations  regard- 
ing non-members  clearing  through  members  will  also  re- 
ceive closer  attention. 

^  The  question  of  country  checks  is  now  being  regulated 
in  some  clearing-houses — a  matter  which  is  specially 
treated  in  one  of  the  chapters  following,  and  the  time  is 
not  far  distant  when  this  subject  will  receive  the  con- 
sideration from  all  the  clearing-houses  to  which  it  is 
entitled. 

i/The  question  of  shipping  currency  by  express,  from 
one  clearing-house  to  another,  will,  in  time,  be  effec- 
tively dealt  with.  A  law  allowing  the  legal  tender  or  gold 
certificates  issued  by  the  various  assistant  treasurers  of 
the  United  States,  payable  to  any  member  of  a  given 


THE    CLEARING-HOUSE    SYSTEM  25 

clearing-house,  to  be  indorsed  and  used  in  the  payment 
of  balances  in  any  city  in  which  there  is  a  sub-treasury,  is 
needed,  and  no  doubt  in  time  will  be  secured  by  the  co- 
operation of  the  different  clearing-houses.  As  these  cer- 
tificates are  payable  only  to  specified  clearing-house 
banks  in  certain  cities,  they  could  be  sent  by  mail  at 
small  rates  to  the  bank,  thereby  becoming  a  medium  of 
exchange  between  large  centres,  rninimizing  loss  and 
saving  the  transportation  of  large  sums  of  money.  The 
government  might  make  a  small  charge  for  their  re- 
demption, if  it  redeemed  them  in  any  city  other  than  the 
one  of  issue. 

^Special  bank  examiners,  assisted  by  trained  experts, 
employed  by  clearing-houses,  subject  to  rigid  rules,  and 
ready  to  go  to  work  at  a  moment's  notice,  might  be  use- 
ful to  the  members  of  a  clearing-house,  for  the  purpose  of 
making  examinations.  These  examiners  should  be  paid 
only  moderate  sums  for  examining  banks,  and  this  would 
enable  directors  of  institutions  that  are  members  of  a 
clearing-house  to  secure,  at  a  moment's  notice,  parties 
who  are  trained  and  thoroughly  competent  to  perform 
the  desired  work.  As  these  men  would  be  in  the  employ 
of  the  clearing-house,  they  would  not  be  subject  to  out- 
side influences,  and  in  this  way  the  question  of  the  super- 
vision of  banking  institutions  by  directors  would  be  dealt 
with  effectively. 

The  settlement  of  balances  is  a  matter  which  should  be 
most  carefully  considered  by  the  banking  and  business 
community,  for  the  proper  management  of  settlements 
will  do  a  great  deal  toward  enhancing  the  prosperity  of 
the  community.     Bankers  sometimes  plead  for  a  more 


26  CLEARING-HOUSES 

elastic  currency,  but  what  is  needed  is  more  elasticity  in 
the  assets  of  the  banks.  What  is  wanted  are  assets  that 
are  readily  convertible  into  cash  in  times  of  panic,  and 
which  will  pay  depositors,  as  well  as^xpermit  new  loans. 
In  such  times  banks  need  expansion  inNlie  right  direc- 
tion, and  not  contraction.  TCash  settlements  in  all  the 
clearing-houses  of  the  United  States  would  be\conducive 
to  better  banking,  for,  under  this  rule,  the  clearing-house 
banks  would  be  obliged  to  keep  themselves  prepared  at 
all  times  to  meet  large  drafts  upon  them  thrdugh  the 
clearings.  On  the  other  hand,  when  clearings  are  settled 
by  drafts  upon  financial  centres,  if  the  banks  are  not  pre- 
pared for  emergencies,  they  borrow  from  the  institutions 
in  those  centres,  and  sometimes  thereby  expand  them- 
selves beyond  prudent  limits. 

Bank  officers  often  loan  money  to  manufacturing  cor- 
porations, which  invest  the  same  in  plant,  and  are  for 
this  reason  unable  to  meet  their  notes  when  due.  Such 
loans  become  fixed  assets  of  the  bank,  and  are  not  avail- 
able in  times  of  financial  stringency.  The  banks  thereby 
become,  to  a  certain  extent,  stockholders  in  the  corpora- 
tions. If  the  banks  compel  the  payment  of  such  loans 
in  times  of  trouble,  they  thereby  restrict  the  operations  of 
the  manufacturing  concerns,  throw  men  out  of  employ- 
ment, and  thus  disarrange  the  entire  industrial  system  of 
the  community. 

Banks  are  often  led  to  invest  their  money  in  unavail- 
able assets,  simply  because  they  feel  that  they  will  not  be 
called  upon  to  pay  any  large  amount  of  cash,  either  to 
their  depositors  direct,  or  through  the  clearing-house. 
Consequently,  the  settlement  of  balances  in  anything  but 


THE    CLEARING-HOUSE    SYSTEM  27 

cash,  or  its  equivalent,  is  liable  at  times  to  affect  the 
whole  economic  condition  of  the  community.  If  a  care- 
ful study  were  to  be  made  of  the  most  prosperous  of  our 
interior  cities,  it  would  be  found  that  the  banks  in  those 
cities  settle  their  clearing-house  balances  on  a  cash  basis. 

Cash  settlements  at  the  clearing-houses  of  interior 
cities  would  compel  the  banks  to  keep  more  money  in 
their  vaults.  This  would  enable  them  more  readily  to 
meet  the  requirements  of  their  customers.  The  need  of 
outside  assistance  would  be,  in  a  measure,  removed,  and 
thereby  all  the  financial  institutions  of  the  country  would 
be  kept  upon  a  more  even  basis. 

Some  of  the  large  clearing-houses  would  find  it  ad- 
vantageous to  provide  depositories  in  which  currency  of 
all  denominations  could  be  deposited  in  vaults,  and  cer- 
tificates issued  therefor,  that  could  be  used  in  the  settle- 
ment of  balances.  Then,  during  the  crop-moving  peri- 
ods, and  at  other  times  when  there  is  a  demand  for  small 
bills,  they  could  be  supplied  from  the  clearing-house 
vaults.  By  such  an  arrangement  the  banks  would  not  be 
obliged,  as  has  often  been  the  case,  to  give  up  one  forrn 
of  money  which  they  desire  to  keep  for  the  sake  of  pro- 
curing another  form,  and  therefore  they  would  be  able 
to  work  to  a  greater  or  lesser  extent  independently  of  the 
sub-treasuries. 

These  and  many  other  matters  might  be  taken  up  by 
clearing-houses,  and  brought  to  the  same  degree  of  per- 
fection as  the  loan  certificate,  an  instrumentality  which 
has  been  of  inestimable  value  to  the  business  world. 


CHAPTER   V 

THE  ADMINISTRATION   OF  CLEARING-HOUSES 

List  of  Officials— Duties  of  Officers— Committees— Annual 
Meetings— Plan  of  Administration  in  Canada— Duties  of 
Officers  and  Committees. 

The  government  of  a  clearing-house  association  in  the 
United  States  is  theoretically  vested  in  a  president,  a  vice- 
president,  a  secretary,  a  treasurer,  a  manager,  and  a  clear- 
ing-house committee,  sometimes  termed  the  committee 
of  management,  or  the  executive  committee.  Not  every 
association,  however,  is  as  completely  officered  as  this. 
In  fact,  there  are  many  associations  that  do  not  have  the 
full  list  of  officials  named.  A  president,  a  manager,  and 
an  executive  committee,  however,  are  found  in  the  organi- 
zation of  nearly  every  clearing-house  association,  for  these 
functionaries  are  practically  indispensable.  The  other 
officials  mentioned  are  lacking  in  various  associations, 
especially  in  those  located  in  the  smaller  cities,  their  du- 
ties being  performed  by  some  of  the  other  officers. 

It  is  the  duty  of  the  president  to  preside  at  all  the  meet- 
ings of  the  association.  As  a  rule,  he  has  power  to  call 
special  meetings  whenever  he  may  deem  it  advisable,  and 
must  do  so  upon  the  request  of  a  specified  number  of  the 
members.  He  exercises  a  general  supervision  over  clear- 
ing-house affairs,  and  performs  the  duties  usually  de- 

28 


THE    ADMINISTRATION    OF    CLEARING-HOUSES      29 

volving  upon  an  executive  officer.  In  many  cases  he  is 
ex-ofUcio  chairman  of  the  clearing-house  committee  and 
of  all  standing  committees.  He  is  elected  annually,  with, 
very  few  exceptions,  and  serves  without  compensation. 

The  vice-president  performs  the  duties  of  the  president 
in  the  latter's  absence.  The  duties  of  secretary  and  treas- 
urer are  frequently  performed  by  the  manager.  The  sec- 
retary keeps  the  record  of  the  proceedings  of  the  meet- 
ings of  the  association,  and  performs  all  the  duties  usually 
pertaining  to  that  office. 

The  treasurer  must  account  for  the  funds  intrusted  to 
his  keeping,  and  must  pay  out  the  same  upon  the  written 
order  of  the  president,  countersigned  by  the  manager,  or, 
if  the  latter  be  at  the  same  time  treasurer  of  the  associa- 
tion, then  upon  the  written  order  of  the  clearing-house 
committee,  or  upon  any  other  authority  that  the  associa- 
tion may  designate, 
^'"'^he  manager  is  either  elected  by  the  association  or  ap- 
pointed by  the  executive  committee  to  serve,  as  a  rule, 
one  year,  although  almost  invariably  he  is  re-elected  from 
year  to  year  for  an  indefinite  period.  In  some  of  the  large 
cities  a  heavy  bond  with  sureties  is  required  of  the  man- 
ager, varying  in  amount  from  ten  thousand  dollars  to 
twenty  thousand  dollars.  In  cities  where  no  cash  is  used 
in  the  settlement  of  balances,  there  is,  of  course,  much 
less  opportunity  for  fraud  on  the  part  of  the  manager, 
and  hence  in  such  cases,  as  a  rule,  no  bond  is  demanded. 
In  many  of  the  smaller  cities,  where  the  manager's  duties 
and  responsibilities  are  light,  and  where  he  is  regularly 
employed  in  some  other  capacity,  his  services  are  not  in- 
frequently gratuitous. 


30 


CLEARING-HOUSES 


The  manager  has  immediate  charge  of  all  business  at 
the  clearing-house,  subject  to  the  control  of  the  clearing- 
house committee.  The  employees  and  the  settling  clerks 
and  messengers  from  the  banks,  while  at  the  clearing- 
house, are  under  his  immediate  direction.  He  imposes 
and  collects  fines  for  violations  of  the  rules  of  the  associa- 
tion, has  supervision  of  all  the  records  of  clearances  and 
settlements,  and  sees  that  the  clearing-house  and  the 
property  connected  therewith  are  kept  in  order.  He 
makes  such  annual  reports  and  performs  such  other  du- 
•^ties  as  may  be  required  of  him. 

The  clearing-house  committee  is  usually  composed  of 
three  members  chosen  from  the  most  capable  and  expe- 
rienced bankers  in  the  association.  In  one  case  which 
has  come  to  notice,  the  membership  of  this  committee 
consists  of  only  two.  It  sometimes  exceeds  three,  as  at 
New  York  and  Philadelphia,  in  each  of  which  cases  there 
are  six  members  besides  the  president,  who  is  a  member 
ex-oificio. 

The  clearing-house  committee  is  elected  annually,  and 
is  by  far  the  most  important  of  all  the  committees.  In 
it  is  vested  almost  absolute  power,  the  direction  of  prac- 
tically the  whole  machinery  of  the  clearing-house  rest- 
ing in  its  hands.  It  is  empowered  by  the  association  to 
procure  suitable  rooms  for  the  clearing-house,  to  provide 
proper  books,  stationery,  fuel,  furniture,  and  whatever 
else  may  be  necessary  for  the  convenient  transaction  of 
business;  to  appoint  a  manager,  except  where  this  power 
is  directly  exercised  by  the  association,  and  generally  to 
supervise  affairs.  It  draws  on  the  members  for  their 
share  of  the  expenses,  fixes  the  salaries  of  the  clerks  in 


THE   ADMINISTRATION    OF    CLEARING-HOUSES      31 

the  clearing-house,  and  has  the  power  to  remove  the 
same,  and  the  manager  as  well,  whenever  it  may  deem 
such  action  to  be  for  the  best  interest  of  the  association.    « 


Not  infrequently  the  clearing-house  committee  is  au- 
thorized to  examine  a  member,  whenever  it  may  seem 
to  it  necessary  so  to  do,  or  whenever  requested  to  do  so 
by  a  specified  number  of  the  other  members,  and,  in  case 
the  member's  condition  justifies  it,  to  demand  sufficient 
securities  for  the  protection  of  its  balances  resulting  from 
the  exchanges  of  the  clearing-house.  It  also  has  power, 
whenever  it  may  seem  necessary  for  the  protection  of  the 
other  banks,  to  suspend  a  member  from  the  association 
until  the  latter  takes  action  upon  it.  The  clearing-house 
committee,  in  most  cases,  holds  regular  meetings  month- 
ly, or  oftener.  Stated  examinations  of  funds  and  securi- 
ties are  often  required,  as,  for  example,  at  San  Francisco, 
where  the  committee  must  examine,  at  least  quarterly, 
all  securities  and  deposits  of  the  association  in  its  charge. 

In  addition  to  the  clearing-house  committee,  there  are 
frequently  a  conference  committee,  a  nominating  com- 
mittee, an  arbitration  committee,  a  committee  on  admis- 
sions, an  exchange  committee,  and,  in  special  emergen- 
cies, a  loan  committee.  No  one  association  has  all  these 
committees,  but  the  New  York  Clearing-house  has  all 
but  the  exchange  committee.  Most  clearing-houses  are 
too  small  and  their  duties  too  simple  to  require  so  exten- 
sive a  division  of  powers,  and  hence,  as  a  rule,  we  find  only 
one  or  two  committees  at  most,  in  addition  to  the  clear- 
ing-house committee. 

The  conference  committee  is  elected  annually  to  serve 
in  special  emergencies,  and  its  duty  consists  in  acting  in 


32  CLEARING-HOUSES 

conjunction  with  the  clearing-house  committee  when- 
ever the  suspension  of  a  member  becomes  a  question  of 
expediency.  There  must  be  at  least  a  majority  of  each 
committee  present  to  suspend  a  member,  and  a  unani- 
mous vote  is  necessary  to  carry.  In  case  of  a  suspension, 
the  clearing-house  committee  must  forthwith  call  a  gen- 
eral meeting  of  the  association  to  take  the  matter  into 
consideration. 

The  nominating  committee  is  elected  annually,  and  is 
charged  with  the  duty  of  presenting  to  the  association, 
at  each  annual  meeting,  the  names  of  candidates  for  presi- 
dent and  secretary,  and  for  membership  upon  the  clear- 
ing-house, conference,  and  nominating  committees. 

The  arbitration  committee  is  appointed  by  the  presi- 
dent at  each  annual  meeting.  Its  duty  is  to  decide  all 
disputes  that  may  be  submitted  to  it  by  both  parties 
thereto,  a  member  of  the  association  being  one  of  them. 
In  associations  where  no  arbitration  committee  exists, 
its  function  is  usually  performed  by  the  clearing-house 
committee. 

The  committee  on  admissions  is  appointed  annually 
by  the  president,  and  the  clearing-house  refers  to  it 
for  examination  all  applications  for  membership  in  the 
association. 

Where  an  association  has  an  exchange  committee,  the 
committee  is  elected  each  year.  It  is  authorized  and  re- 
quired from  time  to  time  to  prepare  schedules  of  rates  of 
exchange  on  out-of-town  items,  including  among  them 
those  taken  as  cash  received  for  collection,  or  held  as 
security  for  loans,  or  that  might  be  discounted  subject 
to  collection. 


THE   ADMINISTRATION    OF    CLEARING-HOUSES      33 

The  Clearing-house  Association  holds  an  annual  meet- 
ing for  the  purpose  of  electing  officers  and  committees, 
and  for  the  transaction  of  other  business.  The  quorum  is 
usually  fixed  at  a  majority  of  all  the  associated  banks.  In 
some  instances,  however,  it  is  placed  at  two-thirds,  and 
in  a  few  cases  even  as  low  as  one-third,  of  all  the  members. 
Sometimes  a  specified  number  is  designated  as  constitut- 
ing a  quorum.  Each  bank  is  expected  to  be  represented 
at  the  annual  meeting  by  one  or  more  of  the  officers,  but 
usually  is  allowed  only  one  vote.  An  exception  to  this 
rule  is  the  association  at  Worcester,  Mass.,  where  two 
votes  are  allowed.  For  failure  to  be  represented  at  an 
annual  meeting,  a  fine  of  two  dollars,  or  three  dollars,  or 
even  five  dollars,  is  imposed.  It  is  the  duty  of  the  asso- 
ciation to  fix  the  salary  of  the  manager,  admit  banks  to 
membership,  and,  when  occasion  demands,  to  .suspend 
or  expel  members.  In  some  of  the  large  cities  the  asso- 
ciations receive  in  special  trust,  and  issue  certificates  for, 
such  United  States  gold  coin  as  any  of  the  associated 
banks  may  deposit  for  safe-keeping  for  clearing-house 
purposes. 

The  method  of  controlling  clearing-house  organiza- 
tions in  Canada  is  somewhat  different  from  that  employed 
in  the  United  States.  There  the  supreme  executive  body 
is  the  board  of  management.  At  Halifax  and  Hamilton 
the  cashiers  and  managers  of  the  several  banks  constitute 
the  board  of  management.  At  St.  John  only  the  man- 
agers or  agents,  or,  in  their  absence,  the  acting  manager 
or  acting  agents,  constitute  the  board.  At  Toronto  seven 
bank  officers  are  elected  at  each  annual  meeting  to  serve 
in  this  capacity,  and  at  Winnipeg  the  committee  is  com- 


/ 


34  CLEARING-HOUSES 

posed  of  five  bank  representatives.  The  chairman  of  the 
board  is  elected  annually  at  Halifax,  Hamilton,  and  St. 
John,  and  at  Toronto  a  chairman,  vice-chairman,  and 
secretary-treasurer  are  elected. 

The  powers  of  the  board  of  management  are  practi- 
cally absolute  in  all  clearing-house  affairs,  being  co-ex- 
tensive with  those  of  the  clearing-house  committee,  and 
the  association  acting  in  executive  session  in  the  United 
States. 

It  is  the  custom  with  Canadian  clearing-houses, 
through  the  board  of  management,  to  arrange  with  a 
member  to  act  as  the  clearing-bank;  to  select  an  officer 
from  time  to  time  to  act  as  manager  of  the  clearing-house; 
to  make  assessments  upon  the  members  for  expenses,  and 
to  exercise  general  control  over  clearing-house  affairs. 
The  manager  presides  at  the  exchanges  between  the 
banks  and  settlement  of  balances,  has  charge  of  the  rec- 
ords of  the  clearing-house,  exercises  control  over  the 
clerks  from  the  several  banks  while  at  the  clearing-house, 
and,  in  a  word,  performs  all  the  duties  customarily  per- 
formed by  clearing-house  managers  in  the  United 
States. 


CHAPTER  VI 
THE  SETTLEMENT  OF  CLEARING-HOUSE  BALANCES 

Results  Accomplished  by  Settlements — Ratio  of  Balances  to 
Clearings — Settlements  with  Money — Clearing-house  Set- 
tlements in  Canada — Money  in  Labelled  Packages — Objec- 
tions to  Silver — Methods  of  Settling  Balances  Without 
Money — Advantages  of  the  Manager's  Check  Over  Settle- 
ments in  Cash. 

The  exchange  of  items  between  the  banks  accom- 
plishes two  results :  First,  it  places  at  the  proper  banks, 
for  payment,  the  items  to  be  exchanged,  which  the  several 
banks  hold;  and  second,  it  determines  the  difference  be- 
tween the  amount  of  th6  items  held  by  each  bank  against 
all  the  other  banks,  and  the  amount  held  by  all  the  other 
banks  against  each  individual  bank.  This  difference  con- 
stitutes the  balance  which  is  to  be  settled. 

A  bank  cannot  know  whether  its  exchanges  at  the 
clearing-house  will  bring  it  out  a  debtor  or  a  creditor^ 
until  the  settling  clerk  returns  from  the  clearing-house. 
It  is  a  very  rare  occurrence  for  a  complete  offset  to  take 
place  in  any  bank's  exchanges;  that  is,  for  the  amounts 
sent  to  the  clearing-house  to  exactly  equal  the  amounts 
received,  in  which  case,  of  course,  there  would  be  no  bal- 
ance. Each  bank  expects  a  difference  one  way  or  the 
other,  ranging  from  a  few  cents  to  a  very  large  amount. 

35 


36  CLEARING-HOUSES 

In  a  great  city,  a  bank  may  be  a  creditor  one  day  to  the 
extent  of  several  hundreds  of  thousands  of  dollars,  and 
the  next  day  a  debtor  to  a  similar  amount.  It  is  of  the 
utmost  importance,  therefore,  that  each  bank  should  be 
prepared  to  meet  any  balance  which  may  appear  against 
it  at  the  clearing-house. 

The  ratio  of  balances  to  clearings  depends  partly  upon 
the  number  of  banks,  but  much  more  upon  the  amount 
and  character  of  their  business,  and  upon  their  relations 
one  to  another.  This  is  illustrated  by  figures,  which  were 
collected  in  1897-98:  At  Pittsburg,  with  nineteen  mem- 
bers and  seventy  non-members  clearing  through  mem- 
bers, the  balances  were  sixteen  and  two-thirds  per  cent, 
to  twenty  per  cent,  of  the  clearings;  at  Buffalo,  with 
eighteen  members,  fifteen  per  cent.;  at  Chicago,  with 
twenty-two  members  and  ninety-seven  non-members 
clearing  through  members,  ten  per  cent.;  at  Louisville, 
with  fifteen  members,  twenty  per  cent.;  at  Rochester, 
with  sixteen  members,  from  twenty  per  cent,  to  twenty- 
five  per  cent.;  at  St.  Louis,  with  seventeen  members, 
ten  per  cent. ;  while  in  New  York,  during  the  first  forty- 
three  years  of  the  existence  of  the  association,  it  was  only 
4.65  per  cent.,  notwithstanding  the  operations  of  the 
United  States  Assistant  Treasurer,  who  almost  always  has 
a  heavy  debit  balance. 

The  more  nearly  the  banks  stand  on  an  equality  with 
each  other,  the  more  nearly  will  their  transactions  ap- 
proach a  complete  offset,  which,  of  course,  would  leave 
no  balance  to  settle. 

The  methods  of  settlement  of  clearing-house  balances 
may  be  divided  in  a  general  way  into  two  classes :  First, 


SETTLEMENT   OF   CLEARING-HOUSE   BALANCES     37 

settlements  with  money,  and  second,  settlements  without 
money. 

A  clearing-house  acts  merely  as  the  agent  of  the  banks 
in  the  payment  of  the  balances.  It  pays  to  the  creditor 
banks  the  money  it  receives  from  the  debtor  banks.  As 
soon  as  the  result  of  the  exchanges  is  known,  the  debtor 
banks  may  begin  the  payment  of  their  balances,  all  of 
which  must  be  paid  in  before  the  expiration  of  a  specified 
time,  usually  two  or  three  hours  after  the  exchanges. 
Failure  on  the  part  of  any  member  to  meet  its  require- 
ment promptly  would  subject  it  to  a  fine. 

Any  kind  of  United  States  money  is  acceptable  in  most 
of  the  small  clearing-houses;  but  in  a  majority  of  the 
large  ones  certain  kinds  of  money  are  npt  acceptable. 
The  following  are  illustrative  examples :  At  Baltimore, 
gold  coin,  greenbacks,  and  certificates,  redeemable  in 
coin,  are  used,  and  silver  is  accepted  only  for  fractional 
parts  of  thousands;  at  Buffalo,  United  States  Treasury 
certificates.  United  States  legal  tender  notes,  national 
bank  notes,  gold  and  silver  certificates,  and  gold  coin 
are  used;  at  Milwaukee,  gold  coin  and  currency;  at  St. 
Paul,  all  forms  of  currency  except  silver  coin,  and  at  San 
Francisco,  Los  Angeles,  Cal.,  and  Portland,  Ore.,  gold 
coin  is  used  exclusively. 

About  seventeen  per  cent,  of  the  clearing-houses  of 
the  United  States  settle  their  balances  entirely  on  a  cash 
basis.  In  Canada,  however,  all  the  clearing-houses,  ex- 
cept the  one  at  Hamilton,  settle  in  government  legal 
tender  notes.  Settlements  in  Hamilton  are  made  by 
drafts  upon  the  head  offices  or  agents  of  the  respective 
banks,  on  Montreal,  in  favor  of  the  clearing-bank  which 


38  CLEARING-HOUSES 

gives  its  own  drafts  on  Montreal  to  the  banks  in 
credit. 

Some  clearing-houses  require  that  money,  when  paid 
in  by  the  banks,  shall  be  assorted  and  put  up  in  packages, 
each  package  to  contain  bills  of  a  given  kind  and  denom- 
ination, and  when  the  balances  are  sufficient,  to  consist 
of  specified  amounts,  usually  one  thousand  dollars,  five 
thousand  dollars,  and  ten  thousand  dollars,  respectively. 
For  instance,  at  Milwaukee  all  currency  paid  to  the  clear- 
ing-house, when  the  amounts  are  sufficient,  must  be  put 
up  in  packages  of  five  thousand  dollars,  or  ten  thousand 
dollars  each.  The  inside  parcels  of  the  packages  must 
bear  the  number  of  the  bank  putting  up  the  same,  with 
the  date  thereon.  Such  packages  must  be  securely  bound 
with  twine  or  tape,  with  a  wide  paper  band  around  the 
centre,  fastened  with  wax,  bearing  the  seal  of  the  member 
putting  them  up,  and  the  date  of  sealing.  No  notes  of  a 
less  denomination  than  five  dollars  (except  to  make 
change),  or  over  one  thousand  dollars,  can  be  paid  in. 
Likewise,  all  gold  coin  must  be  put  up  in  strong  canvas 
bags,  of  five  thousand  dollars  each,  and  such  bags  must 
have  suitable  labels  bearing  the  name  of  the  sealing  mem- 
ber, amount  of  contents,  and  date  of  sealing.  For  all 
gold  coin  or  currency  paid  in,  in  amounts  less  than  five 
thousand  dollars,  the  value  of  the  parcel  or  package  must 
be  guaranteed  by  the  bank  (whose  number  it  bears)  to 
the  bank  breaking  the  package,  for  twenty-four  hours 
after  receiving  it,  but  in  no  case  can  claims  be  made  after 
a  package  has  been  paid  to  any  party  not  a  member  of 
the  association. 

Silver  coin  is  not  excluded  from  settlements  in  clear- 


CO 

D 


I 

-      1 

.     -Dollars 

i 

i 

5f 

I? 
I 

to 


1 


Caufo^ 


S 


C 

o 


43 

I 
o 

i 

CQ 


40  CLEARING-HOUSES 

ing-houses  in  the  United  States  because  of  any  prejudice 
against  it  as  money,  but  because,  owing  to  the  enormous 
amount  of  clearing-house  transactions,  its  bulk  would 
render  it  too  cumbersome  and  inconvenient  for  handling. 
For  the  same  reason  it  is  not  so  desirable  as  other  forms 
of  money  in  large  transactions  of  any  kind. 

A  receipt  is  given  at  the  clearing-house  to  each  debtor 
bank  as  soon  as  its  balance  is  paid.  There  is  presented 
herewith  a  reproduction  of  the  form  used  at  Buffalo. 

This  receipt  is  filled  out  by  the  clearing-house  clerk, 
showing  the  amount  due  from  the  Marine  Bank  (No. 
2)  to  the  clearing-house.  Its  authenticity  is  established 
by  the  signature  of  the  manager  at  the  top.  This  receipt 
is  taken  away  by  the  Marine  Bank  messenger,  who  re- 
turns with  the  funds.  The  manager  then  signs  the  re- 
ceipt in  the  usual  place,  and  in  this  condition  it  becomes  a 
voucher  to  the  Marine  Bank  for  the  payment  it  has  made. 

The  clearing-house  clerks  of  these  banks  have  already 
carried  back  a  receipt,  of  which  a  copy  is  given  here- 
with, that  is  likewise  "  vised  "  by  the  manager  at  the  top. 
This  receipt  is  then  signed,  for  instance,  by  the  cashier 
of  The  City  National  Bank  (No.  20),  and  sent  at  the 
hands  of  two  trusted  messengers,  who  receive  the  funds 
from  the  clearing-house  manager.  This  receipt  in  turn 
is  kept  by  the  clearing-house  as  its  voucher  for  the  pay- 
ment made.  A  receipt  is  sometimes  written  by  the  clerk 
receiving  the  balance,  in  a  book  kept  by  the  manager 
for  that  purpose,  but  a  more  common  method  is  one  sim- 
ilar to  that  described  as  given  by  the  bank. 

There  are  no  less  than  five  different  methods  of  settling 
balances,  in  whole  or  in  part,  without  the  use  of  money 


on 


O 


ho 

u 

o 

€ 

oa 
</) 

3- 


42  CLEARING-HOUSES 

at  the  clearing-house.  They  are  (i)  by  manager's  check 
on  debtor  banks  given  to  creditor  banks;  (2)  by  borrow- 
ing and  loaning  balances  without  interest;  (3)  by  bor- 
rowing and  loaning  balances  with  interest;  (4)  by  the 
use  of  one  or  more  of  three  forms  of  certificates — namely, 
gold  depository  certificates,  United  States  Assistant 
Treasurer's  certificates,  and  clearing-house  loan  certifi- 
cates, and  (5)  by  draft  on  another  city. 

When  money  is  not  used  in  the  adjustment  of  balances 
at  the  clearing-house,  one  of  the  most  common  methods 
of  settlement  is  by  manager's  checks  on  debtor  banks  in 
favor  of  creditor  banks.  In  such  cases  the  creditor  banks 
send  clerks  to  the  clearing-house  to  receive  the  man- 
ager's checks,  which  may  be  cashed  by  the  debtor  banks, 
exchanged  for  cashier's  checks  or  exchange  on  another 
city,  or  sent  through  the  clearings  on  another  day.  Thus, 
at  Salt  Lake  City,  Utah,  the  manager's  check  is  used, 
and  the  same  is  cashed  in  the  afternoon  of  the  same  day. 
At  Louisville,  Ky.,  such  checks  may  be  collected  or  re- 
cleared,  but  sometimes  they  are  not  presented  for  several 
days  after  issue.  At  Indianapolis,  Ind.,  Dallas,  Tex.,  and 
Detroit,  Mich.,  banks  exercise  the  option  of  collecting 
their  checks  or  sending  them  through  the  exchanges  on 
the  following  day. 

The  liability  of  the  clearing-house  for  manager's  checks 
usually  ceases  at  3  o'clock  on  the  day  of  issue,  so  that 
when  they  are  carried  over,  it  is  done  at  the  risk  of  the 
holder.  Where  banks  contribute  to  the  expenses  of  the 
clearing-house,  in  proportion  to  their  average  daily  clear- 
ings for  a  given  time,  they  often  prefer  to  collect  on  the 
day  of  issue,  rather  than  increase  their  exchanges,  and 


(L) 

k 
.'^ 

c^ 

+-» 

• 

oc 

^v 

Qif 

^ 

•^ 

-o 

orsed 
ted  B 

< 

c 

y' 

1 

o 

;e  end 
ssocia 

o 

c 

X 

^    < 

Q 

c 

^    a 

(A 

^  ^ 

8 

> 

■  s 

Q 

c 

3 

c 
E 

n  of  this  C 
er  of  any  o 

< 
D 

o 
c 
E 

• 

1 

r^ 

cd 

s  -^ 

O 

c 

OQ 

n  u 

E 

>% 

§    S 

■  r 

o 

o 

>i> 

Cl,     ^ 

1 

c 
c 

)    o 

> 

1 

i 
: 
1 

c 
ir 

•  1— I 

E 

C 

> 

^ 

5- 

^ 

:z 

< 

•QNOWHDI^    JO    :>INVg   AX] 

o 

> 

C 
O 


cS 


44  CLEARING-HOUSES 

thus  their  expenses,  by  having  the  manager's  check 
cleared. 

With  all  its  various  disadvantages  there  is  one  impor- 
tant advantage  of  the  manager's  check  over  settlements 
in  cash  at  the  clearing-house :  By  its  use  only  one  trans- 
fer of  cash  is  necessary  in  making  settlements,  and  thus 
risk  is  greatly  diminished. 

The  second  mode  of  settlement,  other  than  on  a  cash 
basis,  is  by  borrowing  and  loaning  balances  without  in- 
terest. At  Pittsburg  this  method  is  practised  as  a  mat- 
ter of  convenience  to  the  several  members.  After  the 
exchanges  have  been  made  and  the  balances  determined, 
five  or  six  minutes  are  devoted  to  this  transfer.  Banks 
are  not  allowed  to  over-borrow  or  over-loan  under  a 
penalty  of  a  fine  of  two  dollars  for  each  offence. 

The  third  method  is  that  of  borrowing  and  loaning 
balances  upon  interest,  as  practised  at  Boston. 

The  fourth  method  is  that  of  employing  some  form  of 
certificate.  Many  of  the  large  clearing-houses  provide 
for  a  depository  to  receive  in  special  trust  such  United 
States  coin  as  any  of  the  banks  belonging  to  the  associa- 
tion may  voluntarily  deposit  with  it  for  safe-keeping, 
upon  which  certificates  may  be  issued,  to  be  used  in  the 
settlement  of  clearing-house  balances.  Such  certificates 
are  usually  issued  in  denominations  of  five  thousand 
dollars  and  ten  thousand  dollars,  and  are  negotiable  only 
among  the  associated  banks.  Many  of  the  clearing- 
houses impose  a  fine  for  their  transfer  to  any  other  party 
than  a  member  of  the  association. 

Coin  certificates  were  devised  by  F.  W.  Edmunds,  of 
New  York,  and  came  into  use  about  1857.    The  Bank 


SETTLEMENT   OF   CLEARING-HOUSE   BALANCES     45 

of  America  first  acted  as  a  depository,  but  after  the  be- 
ginning of  the  greenback  epoch,  the  associated  banks 
chose  the  United  States  Sub-treasury  as  such  depository, 
for  both  gold  and  currency.  When  the  new  clearing- 
house in  Cedar  Street  was  occupied,  the  gold  deposits 
were  transferred  to  the  magnificent  vaults  with  which  it 
is  provided,  and  these  at  the  present  time  hold  a  very 
heavy  deposit  of  gold.  The  principal  cities  where  gold 
depository  certificates  are  used  at  the  present  time  are 
New  York,  Philadelphia,  and  Buffalo. 

In  cities  where  United  States  sub-treasuries  are  located, 
banks  may  deposit  with  them  United  States  legal  tender 
notes,  and  receive  therefor  legal  tender  certificates  from 
the  assistant  treasurer,  the  same  to  be  used  in  the  settle- 
ment of  clearing-house  balances  and  to  be  negotiable  only 
among  the  members  of  the  clearing-house  in  the  city 
where  they  are  issued.  At  Philadelphia  these  certificates 
are  issued  in  denominations  of  five  thousand  dollars  and 
ten  thousand  dollars;  and  at  Baltimore  in  denominations 
of  ten  thousand  dollars  only.  It  is  required  that  they  be 
indorsed  both  by  the  bank  to  which  they  are  issued  and 
by  the  bank  which  redeems  legal  tender  certificates  with 
them. 

Clearing-house  loan  certificates  are  issued  only  in 
emergencies,  as  explained  in  the  chapter  devoted  to  that 
subject.  The  period  during  which  balances  are  settled 
by  such  instruments  lasts  usually  only  three  or  four 
months,  or  until  the  panic  which  called  them  forth  has 
subsided. 

The  fifth  method  is  by  draft  on  some  other  city.  In 
some  places  the  option  is  given  of  settling  in  cash,  or  by 


46  CLEARING-HOUSES 

draft,  as  at  Bay  City,  Mich.,  Everett,  Wash.,  Frederick, 
Md.,  Jacksonville,  Fla.,  Knoxville,  Tenn.,  Norfolk,  Va., 
Rochester,  N.  Y.,  and  Scranton,  Pa.  In  others,  settle- 
ments are  made  exclusively  by  drafts  on  another  city. 
Among  these  are  Syracuse,  N.  Y.,  Worcester,  Mass., 
Saginaw,  Mich.,  Fall  River,  Mass.,  Fremont,  Neb.,  Hart- 
ford, Conn.,  Holyoke  and  Lov^ell,  Mass.,  Binghamton, 
N.  Y.,  and  Cleveland,  O.  Sometimes  foreign  drafts  are 
used  in  payments  of  equal  thousands  only,  as  at  Wilming- 
ton, Del,  and  Chester,  Pa. 

About  twenty-five  per  cent,  of  the  clearing-houses  of 
the  United  States  settle  by  draft  on  another  city,  and 
about  the  same  number  settle  by  manager's  check. 
About  seventeen  per  cent,  settle  by  cash  alone,  and  four- 
teen per  cent,  with  cash  and  manager's  check  or  foreign 
drafts.  The  rest  settle  by  a  combination  of  two  or  more 
of  the  foregoing  methods.  Clearing-houses  located  in 
New  England  settle,  as  a  rule,  with  drafts  on  Boston  or 
New  York,  or  both.  Clearing-houses  in  the  vicinity  of 
Philadelphia  usually  settle  by  draft  on  that  city  or  on  New 
York,  and  those  located  in  that  part  of  the  country  lying 
east  of  the  Mississippi  River,  settle,  more  or  less,  by  draft 
on  New  York.  Settlement  is  also  made  by  draft  on  some 
of  the  larger  interior  cities,  as  Detroit  and  Omaha. 


CHAPTER  VII 

CLEARING-HOUSE   EXCHANGES 

Location  of  Clearing-houses — Arrangement  of  Furniture — 
Hour  of  Making  Exchanges — Clearing  Matter — Character 
of  Indorsements — Messengers  and  Settling  Clerks— Con- 
ducting the  Exchanges  —  Determining  Balances  —  Two 
Clearings  a  Day— Detroit  Plan  of  Handling  Collections. 

No  city  has  more  than  one  bank  clearing-house.  The 
location  of  the  clearing-house  is  always  as  near  the  centre 
of  the  banking  district  as  possible.  It  is  especially  im- 
portant that  this  should  be  so  in  a  large  city,  where  the 
banks  are  numerous,  and  often  scattered  over  a  consider- 
able area.  None  of  the  associations,  except  the  one  at 
New  York,  owns  its  clearing-house  property.  Instead, 
the  various  organizations  occupy  rented  quarters,  usually 
in  one  of  the  banks  belonging  to  the  association,  and 
these  they  have  equipped  with  the  necessary  furniture, 
stationery,  and  desks  for  the  several  members. 

The  desks  are  sometimes  arranged  in  straight  rows, 
and  sometimes  in  elliptical  curves,  and  in  a  few  cases  they 
are  placed  like  the  desks  in  a  school-room.  It  is  not  un- 
common in  small  places  for  the  clerks  to  meet  and  make 
their  exchanges  around  a  table,  and  occasionally  the  same 
rule  prevails  in  large  centres. 

Many  ingenious  contrivances  are  wrought  out  in  some 
of  the  exchange-rooms,  as  well,  also,  as  unique  features 

47 


48  CLEARING-HOUSES 

of  decoration.  For  example,  on  the  walls  of  the  room 
at  Buffalo  is  an  ideal  conception  of  the  leading  clearing- 
houses of  the  country,  with  New  York  in  the  centre  and 
the  large  cities  grouped  around  it.  At  Pittsburg  the  ar- 
rangement of  the  desks,  lights,  and  manager's  quarters 
is  unexcelled  for  beauty  and  artistic  taste,  except  it  be  at 
New  York.  The  manager's  desk  is  connected  by  a  pneu- 
matic tube  with  the  bank  below,  through  which  small 
sums  of  money  are  blown  when  needed  to  make  change 
in  the  settlement  of  balances.  At  Providence  there  are 
two  rows  of  desks,  with  that  of  the  manager  at  the  end. 
Each  bank  is  represented  by  a  single  clerk.  Immedialtely 
upon  his  arrival  at  the  clearing-house  he  deposits  with 
the  manager's  assistant  a  credit  ticket,  and  then  proceeds 
to  deposit  his  items  in  stationary  boxes,  located  on  the 
desks  of  the  members.  Each  clerk  has  a  key  to  his  own 
box,  and,  after  distributing  his  checks,  he  takes  his  place 
on  the  inside  of  the  row  of  desks  and  there  performs  the 
duties  of  a  settHng  clerk. 

Many  of  the  smaller  clearing-houses  do  not  rent  per- 
manent quarters,  but  the  banks  belonging  to  the  asso- 
ciation act  as  clearing  agents  in  rotation,  the  cashier  or 
some  other  official  of  the  bank  where  the  clearings  for 
the  time  being  are  made,  acting  as  manager.  At  Hast- 
ings, Neb.,  for  instance,  the  banks  alternate  weekly,  at 
Jacksonville,  111.,  monthly,  and  at  Bay  City,  Mich.,  once 
in  two  months.  At  Lowell,  Mass.,  a  clearing-bank  is 
chosen  at  each  iannual  meeting  of  the  association. 

Each  clearing-house  determines  for  itself  the  time 
when  its  daily  exchanges  shall  be  made,  and  as  practically 
the  only  criterion  in  selecting  an  hour  is  the  convenience 


so  CLEARING-HOUSES 

of  the  several  members,  it  is  not  surprising  that  there  is 
a  wide  diversity  among  associations  in  this  regard.  From 
8.30  o'clock  in  the  morning,  when  the  first  exchanges 
are  made  at  Philadelphia,  Pa.,  the  time  varies  to  3.15 
o'clock  in  the  afternoon,  when  the  exchanges  are  made 
at  Chattanooga,  Tenn.  All  hours  between  these  are  oc- 
cupied, most  of  the  associations,  however,  clearing  before 
12  o'clock.  On  Saturdays,  in  a  majority  of  cases,  clear- 
ings are  made  at  an  earlier  hour  than  on  other  days,  in 
order  to  enable  the  banks  to  close  the  business  of  the  day 
earlier  than  usual. 

When  the  exchanges  take  place  at  10  o'clock,  or  ear- 
lier, it  is  customary  for  the  members  to  clear  the  items 
received  in  the  morning  mails,  or,  in  some  cases,  to  in- 
clude only  the  larger  items  so  received,  and  to  send  those 
received  in  the  afternoon  and  the  smaller  amounts,  if  any, 
left  over  in  the  morning,  through  the  exchanges  on  the 
following  day.  But  when  the  exchanges  take  place  as 
late  as  3  o'clock,  most  of  the  items  received  are  cleared 
the  same  day. 

The  rules  regulating  the  kinds  of  matter  to  be  cleared 
are  by  no  means  uniform.  A  few  of  the  organizations 
specify  in  their  articles  of  association  what  shall  be  con- 
sidered proper  clearing-matter.  Of  such  rules,  the  follow- 
ing, from  the  by-laws  of  a  prominent  Western  clearing- 
house, is  one  of  the  most  common : 

"  Proper  matter  for  clearing  shall  consist  of  checks, 
drafts,  manager's  certificates,  certificates  of  deposit,  de- 
mand or  matured,  and  any  other  matter  specially  agreed 
upon,  until  notice  is  given  to  the  contrary,  and  any  bank 
clearing  paper  not  proper  shall  be  fined." 


CLEARING-HOUSE   EXCHANGES  51 

In  some  places  certain  kinds  of  items  cannot  be  cleared 
unless  certified  on  the  previous  day.  For  example,  at 
Baltimore,  Md.,  and  Topeka,  Kan.,  drafts,  notes,  and 
bills  of  exchange  must  be  certified  before  being  cleared; 
at  Dayton,  O.,  and  Birmingham,  Ala.  (except  in  rare 
cases  at  the  latter  place),  notes  and  bills  of  exchange  must 
be  certified;  but  in  Holyoke,  Mass.,  Los  Angeles,  Cal., 
Lowell,  Mass.,  Springfield,  Mass.,  Springfield,  O.,  To- 
ledo, O.,  Worcester,  Mass.,  and  some  other  cities,  notes, 
drafts,  and  bills  of  exchange  are  cleared  without  certifica- 
tion. With  the  occasional  exception  of  a  note  payable 
at  a  bank,  which  bank  advises  the  bank  holding  the  note 
that  it  will  pay  the  same,  if  sent  through  the  exchanges, 
notes,  drafts,  and  bills  of  exchange  are  not  cleared  at  Cin- 
cinnati, O.,  unless  certified  on  the  previous  day.  A  draft 
on  a  party  located  at  a  distance  is  occasionally  cleared, 
the  arrangement  being  made  by  telephone.  Checks,  ac- 
ceptances, coupons,  and  notes  due  are  cleared  at  Chester, 
Pa.  Only  regular  checks  and  drafts  are  cleared  at  Den- 
ver, Col.  In  addition  to  the  regular  checks,  express 
money-orders  are  cleared  at  Des  Moines,  la.,  through  a 
bank  designated  by  the  express  company  as  its  depository. 

At  Fargo,  S.  Dak.,  the  unusual  custom  prevails  of 
sometimes  clearing,  in  addition  to  the  checks  on  city 
banks,  items  for  out-of-town  correspondents.  For  in- 
stance, Bank  A  sends  through  the  exchanges  to  the  other 
members  the  items  which  it  has  received  on  their  corre- 
spondents; and  the  other  members,  in  turn,  clear  the 
items  which  they  hold  on  A's  correspondents. 

All  checks,  notes,  acceptances,  or  other  items  received 
by  any  member  at  New  Haven,  Conn.,  against  an  asso- 


Iff 


52 


CLEARING-HOUSES 


ciate  member  are  proper  matter  for  clearing.  Any  mem- 
ber at  New  Orleans,  La.,  voluntarily  accepting  a  cashier's 
check  in  settlement  of  a  clearing-house  balance,  is  not  al- 
lowed to  pass  the  check  through  the  clearings. 

Notes  and  drafts  are  not  sent  through  the  exchanges 
at  Rockford,  111.,  nor  are  notes  and  bills  of  exchange  at 
St.  Paul.  As  a  rule,  only  regular  checks  are  included  in 
the  exchanges  at  Savannah,  Ga.,  and  never  drafts,  notes, 
and  bills  of  exchange.  Usually  notes,  acceptances,  and 
bills  of  exchange  are  certified  at  Scranton,  Pa.,  on  the 
morning  of  the  day  they  are  sent  through  the  clearing- 
house. At  Waco,  Tex.,  only  checks  and  manager's  cer- 
tificates, certified,  used  in  settlement  of  balances  at  the 
clearing-house,  are  passed  through  the  exchanges. 

In  the  exchanges  at  Washington,  D.  C,  all  checks 
may  be  cleared  and  all  sight  drafts,  certificates  of  deposit, 
matured  acceptances  payable  at  the  bank,  and  any  other 
matter  certified  or  specially  agreed  upon,  until  notice  is 
given  to  the  contrary;  but  promissory  notes  cannot  pass 
through  the  exchanges  unless  certified  or  authorized  by 
the  member-bank  where  the  same  are  payable.  The  rule 
at  Youngstown,  O.,  is  that  only  items,  which  on  their  face 
are  unconditional  demands  upon  a  bank,  are  payable 
through  the  clearing-house. 

The  question  of  restricted  indorsements  has  been 
widely  discussed  in  banking  journals  and  at  bankers'  con- 
ventions, especially  in  recent  years,  and,  as  a  measure  of 
self-protection,  most  of  the  large  clearing-house  associa- 
tions have  adopted  resolutions,  declaring  that  items  bear- 
ing restricted  indorsements,  such  as  "  For  Collection," 
"  For  Account  of,"  "  For  Credit  of,"  and  "  For  Deposit," 


/ 
CLEARING-HOUSE   EXCHANGES  53 

shall  be  considered  improper  matter  for  clearing,  unless 
specially  guaranteed  by  the  clearing-bank.  Items  in- 
dorsed in  bank,  or  "  Pay  to  the  order  of ,"  or  ''  Pay 

to or  order,"  are  not  regarded  as  bearing  restrictive 

indorsements. 

Each  bank,  before  sending  its  exchanges  through  the 
clearing-house,  is  required  to  indorse  them  with  its  num- 
ber and  the  words   "  Received   payment  through  the 

Clearing-house,"  or  such  other  indorsement  as  the 

clearing-house  committee  or  the  association  may  deter- 
mine upon.  Evidently  it  would  require  a  prodigious 
amount  of  labor  to  write  the  indorsements  upon  the 
items,  and,  indeed,  it  would  be  a  physical  impossibility  in 
many  of  the  banks  of  the  large  cities  to  do  so.  Hence, 
an  ofBcial  stamp  is  used  and  the  same  is  usually  accepted 
as  a  guarantee  of  all  previous  indorsements,  whether 
written  or  stamped.  It  is  not  construed  as  supplying  or 
guaranteeing  to  supply  a  missing  indorsement. 

The  number  of  messengers  required  to  transport  the 
exchanges  to  and  from  the  clearing-house  varies  widely 
in  different  cities.  When  the  business  is  light,  as  in  some 
of  the  smaller  cities,  one  person  acts  as  both  messenger 
and  settling  clerk,  while  in  some  of  the  larger  cities  the 
exchanges  of  some  of  the  banks  are  so  heavy  that  four  or 
five  messengers  are  necessary  to  transport  them.  Each 
bank,  in  addition,  is  represented  by  one  settling  clerk, 
who,  as  a  rule,  is  a  young  man,  quick  and  accurate  in 
arithmetical  calculations. 

Checks  are  taken  to  the  clearing-house,  bound  to- 
gether with  rubber  bands,  or  enclosed  in  large  envelopes, 
the  items  that  go  to  each  of  the  other  members  being 


54 


CLEARING-HOUSES 


kept  separate.  If  the  bulk  is  not  too  great,  they  are  often 
carried  in  the  hand,  but  it  is  customary  in  the  large  cities 
to  transport  them  in  leather  bags  or  cases. 

The  usual  rule  is  that,  immediately  upon  his  arrival  at 
the  clearing-house,  the  settling  clerk  shall  deliver  to  the 
manager,  or  the  assistant  manager,  a  ticket  containing 
the  amount  of  the  items  brought  from  his  bank.  An  ex- 
ception to  this  rule,  in  a  large  clearing-house,  is  found  at 
Baltimore,  where  the  clerks,  instead  of  delivering  tickets, 
call  ofif  the  amounts  to  the  manager,  while  he  enters  them 
upon  his  proof-sheet.  An  important  exception  is  also 
found  at  Cincinnati,  where  no  entries  of  any  kind  are 
made  by  the  manager  upon  his  settling  sheet  until  the 
proof  has  been  made.  This  done,  the  clerks  report  their 
credit  and  debit  balances,  and  these  alone  are  entered. 

Before  the  exchanges  begin  at  West  Superior,  Wis., 
there  is  a  roll-call  of  the  clerks.  The  only  advantage  in 
this  unusual  procedure  would  be  the  detection  of  the  ab- 
sence of  a  member,  and  as  this  must  necessarily  appear 
before  the  exchanges  are  completed,  it  seems  to  be  an 
unnecessary  expenditure  of  time. 

A  fine  is  usually  imposed  upon  a  member  for  being  late 
at  the  clearings,  and  if  the  representative  fails  to  appear 
before  a  specified  time,  the  member  is  excluded  from 
the  exchanges  of  the  day,  and  must  make  its  clearings 
at  the  counters  of  the  other  banks.  The  fines  commonly 
vary  from  one  dollar  to  five  dollars,  but  at  Milwaukee  they 
are  unusually  high.  For  the  first  five  minutes  or  part 
thereof,  the  fine  in  that  city  is  three  dollars;  for  the  sec- 
ond five  minutes  or  part  thereof,  te^  dollars;  and  over 
ten  minutes  late,  twenty-five  dollars. 


CLEARING-HOUSE    EXCHAN 


Two  methods  of  delivering  items  in  the  exchange- 
room  are  in  vogue.  In  the  one  case  they  are  delivered 
by  all  the  clerks  simultaneously;  in  the  other,  by  each 
clerk  as  soon  as  he  arrives  at  the  clearing-room;  but 
the  exchanges  must  all  be  made  before  a  specified  time. 

When  the  clerks  begin  the  exchanges  at  the  same  time, 
they  all  start  upon  the  signal  from  the  manager,  with 
their  items  on  their  arms,  or  in  bags  or  cases  strapped 
over  the  back,  and  proceed  in  the  same  direction,  pass- 
ing along  the  desks  until  they  have  deposited  all  their 
paper.  In  the  large  cities,  where  the  clerks  are  numerous, 
order  and  method  in  delivery  are  necessary  to  prevent 
confusion  and  to  save  time.  But  in  small  cities,  where 
the  clerks  usually  deliver  their  items  as  soon  as  they  ar- 
rive, more  liberty  is  allowed  in  personal  conduct;  also 
by  this  method  an  opportunity  is  afforded  to  the  less 
proficient  clerks  to  arrive  early  and  list  their  items  as  fast 
as  they  are  delivered  from  the  other  banks. 

Where  the  exchanges  are  made  around  a  table,  without 
any  net-work  or  division  of  any  kind  between  the  clerks, 
it  sometimes  happens  that  bundles  of  items,  thrown  care- 
lessly on  the  table,  are  entered  by  the  wrong  clerk.  To 
prevent  errors  of  this  character,  at  Cincinnati  four  dif- 
ferent colors  are  used  for  slips  containing  lists  of  items 
and  attached  to  the  exterior  of  the  bundles,  all  the  slips 
on  the  bundles  going  to  a  particular  bank  being  of  the 
same  color.  Thus,  clerks  representing  members  num- 
ber one,  two,  three,  and  four,  sitting  alongside  of  each 
other  at  the  table,  have  different  colored  slips,  and  the 
same  colors  are  used,  correspondingly,  by  members  num- 
ber five,  six,  seven,  and  eight,  and  so  on  around  the  table. 


"1   -T^  C\ 

^y^  Si  CLEARING-HOUSES 

Also  the  debit  and  credit  slips  brought  by  the  settling 
clerks  are  of  different  colors. 

The  speed  with  which  the  business  of  a  clearing-house 
is  transacted  seems  almost  incredible.  The  actual  time 
required  to  make  the  exchanges  varies  from  one  and  one- 
half  minutes  to  ten  minutes.  When  the  exchanges  are 
made  simultaneously,  the  time  varies,  as  a  rule,  in  pro- 
portion to  the  number  of  members.  In  view  of  the  short- 
ness of  the  time  required  to  make  its  exchanges,  the 
New  York  Clearing-house  afifords,  perhaps,  the  best  ex- 
ample in  existence  of  the  success  of  modern  business 
methods,  as  compared  with  the  old  ways  of  doing  things. 
The  clearances  exceed  on  the  average  one  hundred  mill- 
ion dollars  a  day,  and  yet  this  enormous  amount  of  paper 
is  exchanged  between  the  banks  in  ten  minutes,  and 
often  in  less  time. 

When  the  clearings  have  been  made,  the  next  step  is 
for  each  settling  clerk  to  determine  the  amount  of  the  bal- 
ance of  his  own  bank,  which  is  found  by  taking  the  dif- 
ference between  the  amount  brought  to  the  clearing- 
house and  the  amount  taken  away.  There  is  practically 
no  exception  to  this  rule.  A  certain  amount  of  time  is 
allowed  for  the  proof,  and  for  each  error  remaining  un- 
discovered at  the  expiration  of  the  allotted  time  a  fine  is 
usually  imposed.  At  the  end  of  a  certain  time  thereafter 
it  may  be  doubled,  and  still  later  it  is  often  quadrupled. 

In  some  cases  the  settling  clerks  do  not  remain  until 
the  proof  is  made,  but  leave  for  their  respective  banks  as 
soon  as  they  make  out  their  tickets  for  the  amounts 
brought,  amounts  received,  and  balances.  If  the  man- 
ager or  his  assistant  in  charge  of  the  proof-sheet  finds, 


CLEARING-HOUSE    EXCHANGES^ '^^ 

after  he  has  made  all  the  entries  and  additions,  that  his 
work  does  not  prove,  he  first  determines  whether  the 
error  was  made  by  one  of  the  settling  clerks  or  by  him- 
self. If  by  one  of  the  clerks,  it  is  usually  discovered  in 
a  short  time  at  the  bank,  whereupon  the  latter  reports 
the  error  to  the  manager  at  the  clearing-house,  either  by 
messenger  or  by  telephone.  If  the  bank  fails  to  report 
the  error  in  due  time,  the  manager  takes  the  credit  and 
debit  slips  and  finds  it. 

At  Cincinnati  no  fine  is  imposed  upon  a  clerk  or  his 
bank  for  an  error  in  a  slip,  if  it  is  discovered  and  reported 
promptly  to  the  manager.  At  Louisville,  however,  a  fine 
of  two  dollars  is  imposed,  without  regard  to  time  limita- 
tions. 

All  that  has  been  said  thus  far  applies  to  those  clearing- 
houses that  clear  only  once  a  day.  But  there  are  in  the 
United  States  five  clearing-houses  that  make  practically 
two  clearings  a  day.  These  are  at  Philadelphia,  Pa.,  Fall 
River  and  New  Bedford,  Mass.,  Detroit,  Mich.,  and  San 
Francisco,  Cal.  The  details  regarding  the  exchanges  at 
Philadelphia  are  set  forth  in  the  chapter  on  the  Philadel- 
phia Clearing-house.  At  Fall  River  an  amendment  was 
made  to  the  Constitution,  May  2.y,  1895,  as  follows: 

"  The  cashier  of  the  clearing-house  shall  be  the  man- 
ager of  the  clearing-house,  and  the  settling  clerks  shall 
be  under  his  direction  while  at  the  clearing-house.  An 
exchange  of  checks  and  other  items  for  clearing  shall  be 
made  daily  at  11  o'clock  a.m.,  and  the  final  clearing  at 
1.30  P.M.  The  debtor  members  shall  pay  to  the  manager 
of  the  clearing-house  the  balances  against  them  by  2  p.m., 
and  on  or  before  2.15  o'clock  the  creditor  members  shall 


58  CLEARING-HOUSES 

receive  the  respective  balances  dne  them,  except  that 
there  shall  be  but  one  clearing  on  Saturdays,  at  1 1  o'clock 

A.M." 

The  first  clearing  at  Fall  River  is  made  at  1 1  o'clock, 
in  order  that  the  book-keepers  at  the  banks  may  have 
most  of  the  checks  for  entry  as  soon  as  possible.  This  is 
simply  an  exchange  of  checks,  notes,  and  drafts,  pay- 
able at  the  bank,  and  they  are  thus  placed  at  the  bank 
where  they  are  payable  before  noon.  The  footings  of 
this  clearing  are  carried  on  the  various  slips  to  the  second 
clearing  at  1.30  o'clock,  when  balances  are  settled.  This 
has  been  the  custom  ever  since  the  inauguration  of  the 
clearing-house. 

At  New  Bedford,  however,  from  the  date  of  organiza- 
tion in  September,  1888,  until  February,  1890,  there  was 
but  one  clearing  a  day,  namely,  at  12  o'clock.  For  some 
months  prior  to  the  annual  meeting  in  February,  1890, 
there  had  been  considerable  opposition  to  clearing  at  that 
hour,  on  the  part  of  one  member  of  the  association,  be- 
cause thereby  it  was  obliged  to  carry  over,  occasionally, 
large  amounts  of  checks  on  other  banks,  taken  in  pay- 
ment of  notes  and  cotton-drafts,  for  which  in  some  cases 
it  was  required,  by  special  arrangement  with  correspond- 
ent banks,  to  remit  at  par  upon  the  day  of  payment.  So 
strong  was  this  opposition  that  the  question  finally  threat- 
ened to  disrupt  the  organization,  and,  as  a  compromise 
measure,  it  was  at  last  decided  to  change  the  hour  to 
I  o'clock  for  a  final  clearing,  which  nominally  was  and 
still  is  the  hour  of  closing  for  the  national  and  savings 
banks  of  the  city.  At  the  same  time  a  preliminary  ex- 
change was  provided  for,  the  same  to  take  place  at  12 


CLEARING-HOUSE    EXCHANGES  59 

o'clock,  and  this  arrangement  worked  with  partial  suc- 
cess until  March,  1895,  when  the  hour  for  the  preliminary 
clearing  was  changed  to  11.30.  This  was  done  in  order 
to  facilitate  the  work  of  the  book-keepers  in  entering  the 
greater  part  of  the  day's  items. 

This  preliminary  exchange  at  New  Bedford  includes 
all  checks  received  in  the  ordinary  course  of  business 
before  1 1  o'clock,  including  those  received  through  the 
early  mails,  together  with  the  notes  and  acceptances  ma- 
turing that  day.  Probably  ninety  per  cent,  of  the  day's 
items  are  thus  disposed  of  before  the  final  clearing.  The 
latter  includes  comparatively  few  items,  although  they 
frequently  exceed  in  amount  the  items  of  the  preceding 
exchange,  since  cotton-drafts  and  corporation  notes  are 
usually  paid  between  12  o'clock,  noon,  and  i  o'clock. 

The  association  at  Detroit,  Mich.,  pursues  a  method  in 
handling  collections  unlike  that  followed  anywhere  else 
in  the  United  States.  By  Section  12  of  the  Constitution 
of  the  Detroit  Clearing-house,  the  hour  designated  for 
making  the  exchanges  is  fixed  at  12.15  P-^-  There  is, 
however,  a  previous  exchange  at  9.30  a.m.,  which  was 
authorized  by  amendment  to  Section  12  of  the  Constitu- 
tion, on  November  30,  1898.  The  following  is  the  text 
of  the  amendment: 

"  Precisely  at  9.30  o'clock  a.m.  on  each  secular  busi- 
ness day,  except  Saturday,  a  representative  from  each 
member  shall  be  present  at  the  clearing-house,  and  at 
that  hour  such  representatives  shall  deliver  to  the  repre- 
sentative of  each  of  the  other  members  the  promissory  ' 
notes,  acceptances,  drafts,  or  other  obligations  due  and 
payable  on  that  day  at  the  of^ces  of  the  several  members. 


6o  CLEARING-HOUSES 

Such  notes,  acceptances,  drafts,  or  other  matured  paper 
shall  be  accompanied  by  a  separate  list  for  the  mem- 
ber at  whose  of^ce  it  is  paid.  A  duplicate  list  shall  be 
checked  and  receipted  by  the  messenger  representing  the 
member  at  whose  office  the  obligations  thereon  listed 
are  payable,  and  such  receipted  list  shall  be  handed  back 
to  the  representative  of  the  member  delivering  the  items, 
as  above.  Precisely  at  3  o'clock  p.m.  a  representative  of 
each  member  shall  be  present  at  the  clearing-house,  and 
settle  with  the  representatives  of  such  members  as  shall 
have  delivered  items  to  his  bank  at  the  morning  meet- 
ing of  that  day,  either  by  returning  such  items  or  the 
proceeds  thereof  in  the  shape  of  the  obligation  or  obliga- 
tions of  his  bank  payable  through  the  exchanges  of  the 
following  day.  The  representative  of  the  member  with 
whom  such  settlement  is  made  shall  surrender  to  him  the 
receipt  taken  at  the  morning  meeting  for  such  items; 
the  surrender  of  such  receipts  to  be  an  acknowledgment 
that  all  items  thereon  listed  have  been  properly  accounted 
for. 

"  The  manager  of  the  clearing-house  shall  have  charge 
of  the  representatives  of  the  members  at  the  meetings 
for  the  purpose  indicated,  and  the  same  fines  shall  be  im- 
posed for  failure  to  be  properly  represented  promptly  at 
any  meeting,  for  errors,  or  for  disorderly  conduct,  as  the 
members  are  liable  for  in  the  clearing  of  exchanges;  and 
the  work  of  delivering  obligations  or  settling  therefor 
shall  not  be  delayed  longer  than  five  minutes. 

"  In  case  of  the  failure  on  the  part  of  any  member 
either  to  return  all  the  obligations  received  by  it  or  to  ac- 
count therefor  as  provided  above,  such  action  shall  be 


CLEARING-HOUSE   EXCHANGES  6l 

considered  an  infraction  of  the  rules  of  the  clearing-house, 
and  a  fine  of  two  dollars  shall  be  imposed  for  every  such 
infraction. 

''  In  case  of  failure  of  any  member  to  be  represented 
on  the  morning  of  any  day,  such  member  shall  deliver  to 
the  other  members  at  their  respective  ofBces  the  obliga- 
tions due  on  that  day,  listed  and  to  be  receipted  for; 
but  such  obligations  may  be  settled  for  at  the  afternoon 
meeting,  and,  in  case  of  failure  of  any  member  to  be  prop- 
erly represented  at  the  3  o'clock  meeting  for  settlement, 
such  member  so  failing  to  be  on  time  shall,  before  3.15 
o'clock,  deliver  to  the  other  members  settlement  for  the 
obligations  due  on  that  day." 


CHAPTER  VllI 

CLEARING   COUNTRY  CHECKS 

The  Growing  Use  of  Checks — The  Small  Percentage  of  Actual 
Money  Used  in  Business — The  Difficulty  of  Country  Checks 
—  Remedies  Proposed  —  State  and  National  Clearing- 
houses— The  Long  Island  •  Experiment — The  Success  at 
Sedalia,  Mo. 

The  use  of  bank-checks  and  drafts  in  business  transac- 
tions in  the  United  States  is  more  extensive  than  in  any 
other  country,  and  the  tendency  to  such  use  is  constantly 
on  the  increase.  So  popular  have  checks  and  drafts  be- 
come that  the  increase  has  more  than  kept  pace  with  the 
increase  in  business,  which  means  that  the  proportion  of 
money  in  use  to  the  volume  of  business  transactions  has 
been  on  the  decline. 

The  use  of  checks  and  drafts  is  proportionately  greater 
in  the  large  financial  centres  than  in  the  small  towns. 
According  to  reports  made  by  the  national  banks  to  the 
Comptroller  of  the  Currency  in  1881,  the  receipts  in  New 
York  City,  on  June  30th  of  that  year,  were  made  up  of 
ninety-eight  and  seven-tenths  per  cent,  checks,  drafts, 
etc.,  and  one  and  three-tenths  per  cent,  gold  coin,  silver 
coin,  and  paper  money. 

In  other  cities  the  checks  and  drafts  were  94.38  per 
cent.,  and  the  money  5.62  per  cent.    In  the  country  out- 

62 


CLEARING    COUNTRY    CHECKS  67 

the  Long  Island  banks.  Thus  the  Queens  County  Bank 
has  practically  become  a  clearing-house  for  the  exchange 
of  paper  between  the  country  banks  of  Long  Island  and 
metropolitan  banks,  and  that  the  latter  regard  it  as  a 
saving  of  both  time  and  money  is  evident  from  the  fact 
that  most  of  the  banks  continue  to  make  their  exchanges 
through  that  channel. 

What  has  recently  been  put  in  operation  in  Boston  is 
another  instance,  and  this  vi^ill  be  found  described  in  de- 
tail in  another  part  of  this  volume. 


CHAPTER   IX 

TYPICAL  JOURNEY   OF  A   COUNTRY   CHECK 
REMITTED  FOR  A   CITY   ACCOUNT 

The  Small  Amount  of  Work  Required  of  Payer  and  Payee— 
The  Large  Amount  of  Work  Required  of  the  Bank  in 
which  the  Check  is  Deposited  and  its  Correspondent — What 
the  Receiving  Bank  Does— What  its  Regular  Correspondent 
in  the  City  Nearest  the  Country  Bank  is  Required  to  do — 
What  the  Country  Bank  has  to  do  — An  Illustrative 
Example. 

By  way  of  emphasizing  the  need  of  reform  in  the  matter 
of  collecting  country  checks,  a  brief  glance  at  the  meth- 
ods current,  in  various  directions,  at  the  present  time  will 
be  advantageous.  A  merchant  in  Massillon,  O.,  buys  a 
bill  of  goods  in  New  York,  amounting  to  two  hundred 
and  fifty  dollars,  and  pays  for  the  same  with  a  check  on  his 
local  bank.  The  New  York  jobber  from  whom  the  goods 
were  bought  makes  the  proper  entries  in  his  records  for 
the  check,  upon  its  receipt  by  him,  and  deposits  the  check 
with  his  (New  York)  bank.  The  receiving  teller  of  the 
bank  in  which  the  check  is  deposited,  after  checking  it  off 
the  deposit  slip,  enters  it,  by  amount  only,  in  his  record  of 
out-of-town  checks. 

Another  clerk  enters  the  check  on  a  sheet  headed  with 
the  depositor's  name,  stating  date  of  deposit,  place  of 

68 


TYPICAL  JOURNEY  OF  A  COUNTRY  CHECK   69 

payment,  and  amount  for  the  purpose  of  making  the 
proper  charge  thereon.  The  slip  is  sent  to  the  jobber,  ad- 
vising him  of  the  charge.  The  charge  itself  is  made 
through  a  book  known  as  the  debits  of  exchange  from 
which  the  book-keeper  posts  the  charge. 

A  representative  of  the  corresponding  department  of 
the  bank  receipts  for  the  item  on  the  receiving  teller's 
record,  after  satisfying  himself  that  the  amount  has  been 
properly  listed  thereon.  Another  representative  sorts  the 
check  with  others  on  a  sorting  table,  according  to  place 
of  payment,  and  then  stamps  the  bank's  indorsement  on 
the  back  of  the  check. 

The  check  is  then  laid  on  the  collection  enclosure  sheet 
for  transmittal  to- a  Cleveland  bank,  since  all  Massillon 
items  are  collected  through  that  channel  by  this  particular 
New  York  bank.  The  check  is  next  listed  on  the  en- 
closure sheet,  and  the  footing  of  the  letter  containing  this 
item  is  charged  to  the  collection  account  of  the  Cleve- 
land bank. 

A  record  of  the  item  is  then  made  in  the  foreign  cash 
register,  under  the  account  of  the  bank  of  Cleveland  to 
which  it  is  forwarded  for  collection.  This  record  consists 
of  the  date  sent,  the  name  of  depositor,  the  name  of 
drawer,  name  of  payer,  place  of  payment,  and  amount, 
together  with  any  instructions  which  are  to  accompany 
the  item,  regarding  the  handling  of  the  same. 

After  all  these  details  have  been  completed,  the  name 
of  the  Cleveland  bank  is  filled  in  on  the  indorsement 
stamp.  A  record  is  then  made  on  the  letter  register, 
showing  the  name  of  the  Cleveland  bank,  date  when  the 
collection  letter  is  sent,  and  the  total  amount  of  the  items 


70 


CLEARING-HOUSES 


contained  in  the  letter.  This  record  is  made  in  order  that 
the  work  of  the  bank  may  be  facihtated  in  keeping  track 
of  its  remittances,  so  that  should  an  acknowledgment  of 
the  same  not  be  promptly  received,  a  tracer  may  be  sent 
out  without  delay  to  secure  the  desired  information. 
Manifestly,  it  is  essential  to  the  bank  to  know  that  all 
letters  containing  enclosures  are  promptly  and  properly 
acknowledged.  An  envelope  is  then  addressed,  the  let- 
ter folded  and  enclosed,  the  envelope  sealed  and  stamped, 
and  finally  examined  to  see  that  it  is  properly  addressed, 
sealed,  and  stamped.  The  letter  is  then  mailed  at  the 
New  York  Post-of^ce. 

The  Cleveland  bank,  on  receipt  of  this  letter,  enters  in 
detail  upon  its  books  those  items  contained  in  it  which 
are  payable  outside  of  Cleveland.  It  then  writes  a  letter 
to  its  Massillon  correspondent,  enclosing  the  two  hun- 
dred and  fifty  dollar  check  for  collection,  makes  a  record 
of  the  letter  and  enclosure,  addresses  an  envelope,  in 
which  are  placed  the  letter  and  enclosure,  and  seals, 
stamps,  and  mails  the  letter. 

The  Cleveland  bank  next  acknowledges  the  receipt  of 
the  item,  by  drawing  and  remitting  a  check  on  its  New 
York  correspondent  for  the  amount,  less  the  usual  charge 
for  exchange.  It  writes  a  letter,  enclosing  the  check, 
takes  a  record  of  the  same,  addresses  an  envelope,  puts 
in  the  enclosures,  then  seals,  stamps,  and  mails  the  letter. 

The  check  thus  received  by  the  New  York  bank  is 
checked  off  the  remittance  letter,  is  stamped  with  the 
paid  stamp  of  the  collecting  bank,  is  listed  upon  a  slip 
with  the  other  items  received  by  the  bank  the  same  day 
upon  the  other  New  York  bank  on  which  the  check 


TYPICAL  JOURNEY  OF  A  COUNTRY  CHECK   71 

received  by  it  is  drawn.  The  items  thus  made  up  are  col- 
lected through  the  clearing-house.  The  paying  bank 
checks  off  the  items  paid  through  the  clearing-house  from 
the  slip  on  which  they  are  listed,  examines  the  check  in 
question  to  see  that  it  is  properly  drawn,  dated,  and 
signed,  and  that  the  signature  is  genuine,  charges  the 
check  to  the  Cleveland  bank's  account  on  its  books,  can- 
cels the  check,  enters  the  checks  on  a  voucher-list,  and  at 
the  end  of  a  given  period  returns  the  check  to  the  Cleve- 
land bank. 

The  Cleveland  bank,  upon  receiving  its  account  cur- 
rent, voucher-list  and  cancelled  vouchers,  immediately 
checks  off  the  vouchers  and  verifies  the  statement  of  ac- 
count. It  then  compares  the  checks  with  the  stubs  in  the 
check-book,  and  examines  the  checks  themselves  to  as- 
certain if  the  indorsements  are  correct  or  if  any  altera- 
tions have  been  made  thereon,  and  at  last  files  the  checks 
away  for  future  reference,  including  the  one  that  has  been 
used  in  this  particular  case  under  consideration. 

The  letter  from  the  Cleveland  bank  to  Massillon,  con- 
taining the  item,  is  mailed  the  same  day  that  the  check 
is  received  from  New  York.  It  is  received  in  Massillon 
the  day  following.  After  carefully  examining  the  check 
to  see  that  it  is  properly  drawn  and  dated,  and  that  the 
signature  is  genuine,  the  Massillon  bank  charges  the 
check  to  its  customer's  account  and  then  draws  its  check 
on  Cleveland,  less  the  usual  charge  for  exchange,  in  pay- 
ment of  the  same.  It  next  writes  a  letter,  enclosing  the 
check,  takes  a  record  of  the  same,  addresses  an  envelope, 
puts  in  the  enclosures,  and  then  seals,  stamps,  and  mails 
the  letter. 


dFTHE 

\  OF 


;2  CLEARING-HOUSES 

The  customer  in  due  course  has  his  account  made  up, 
checks  off  the  cancelled  checks  returned  by  the  bank 
from  the  voucher-list,  compares  the  checks  with  the  stubs 
in  his  check-book,  examines  the  checks  to  ascertain  if  the 
indorsements  are  correct  or  if  any  alterations  have  been 
made,  and  finally  files  them  away  for  future  reference. 

The  Cleveland  bank,  upon  the  receipt  of  the  remittance 
from  its  Massillon  correspondent,  completes  its  records 
by  filling  in  the  date  of  the  receipt  of  the  remittance  and 
the  amount  of  exchange  charged  by  the  Massillon  bank. 

The  check  thus  received  is  listed  by  the  Cleveland 
bank  upon  a  slip  containing  all  the  items  received  by  it 
the  same  day  upon  the  other  Cleveland  bank  on  which 
the  check  is  drawn.  The  items  thus  made  up  are  then 
collected  through  the  clearing-house. 

The  paying  bank  checks  off  the  items  paid  through  the 
clearing-house  from  the  slip  on  which  they  are  listed, 
examines  the  check  in  question  to  see  that  it  is  properly 
drawn,  dated,  and  signed,  and  that  the  signature  is  gen- 
uine, charges  the  check  to  the  Massillon  bank's  account 
on  its  books,  cancels  the  check,  enters  the  check  on  the 
voucher-list,  and  at  the  end  of  a  given  period  returns  the 
check  to  its  correspondent,  the  Massillon  bank. 

The  Massillon  bank,  upon  receiving  its  account  cur- 
rent, voucher-list,  and  cancelled  checks  from  the  Cleve- 
land bank,  immediately  verifies  the  statement  of  account, 
compares  the  checks  with  the  stubs  in  the  check-book, 
and  examines  the  checks  themselves  to  ascertain  if  the  in- 
dorsements are  correct  or  if  any  alterations  have  been 
made  in  them,  and  finally  files  the  checks  away  for  future 
reference. 


•soaa  pJBAVpOOjW 


74  CLEARING-HOUSES 

In  order  to  effect  the  collection  of  the  afore-mentloned 
check,  drawn  on  a  country  bank  and  remitted  to  New 
York  in  payment  of  an  account,  two  checks  had  to  be 
drawn;  four  letters  had  to  be  written;  four  cents  in  in- 
ternal revenue  stamps  were  used;  eight  cents  in  postage- 
stamps  were  used,  and  seventy-five  or  more  handlings  of 
the  checks  were  involved  by  a  score  or  so  of  clerks,  in 
five  different  banks,  located  in  three  different  cities. 

Lest  the  picture  should  seem  to  be  overdrawn — for,  in 
fact,  that  which  has  been  presented  is  only  an  average 
case — the  following  account  of  the  actual  travels  of  a 
check,  of  much  smaller  size  and  drawn  upon  a  bank  much 
nearer  New  York  than  Massillon,  is  submitted.  It  is  il- 
lustrated by  a  reduced  fac-simile  of  the  check  itself  and 
the  indorsements  that  it  received  in  transit. 

The  check,  which  was  for  forty-three  dollars  and  fifty- 
six  cents,  was  drawn  by  Woodward  Brothers,  of  Sag 
Harbor,  N.  Y.,  and  paid  to  Berry,  Lohman,  &  Rasch,  of 
Hoboken,  N.  J.,  who  deposited  it  in  the  Second  National 
Bank  of  Hoboken.  This  bank  sent  it  to  Harvey  Fisk  & 
Sons,  of  New  York,  who,  having  no  regular  correspond- 
ent in  the  neighborhood  of  the  bank  on  which  it  was 
drawn,  sent  it,  along  with  other  collections,  to  their  Bos- 
ton correspondent,  the  Globe  National  Bank.  The  Globe 
National  Bank  of  Boston,  for  reasons  that  are  not  appar- 
ent, sent  it,  presumably  with  other  items,  to  its  corre- 
spondent at  Tonawanda,  N.  Y.,  namely,  the  First  Na- 
tional Bank  of  that  city.  The  Tonawanda  bank,  evidently 
realizing  that  the  check  had  wandered  far  out  of  its 
course,  and  in  an  effort  to  get  it  nearer  home,  transmitted 
it  to  the  National  Exchange  Bank  of  Albany,  which  insti- 


^^«  first  nT'     ""''""^ 


WlZ'  J^'^^/^E,  BANKER. 


*o»toni  or  orrfer. 

^^nfc  of  Hofioken. 


'PAYli^TH^OyEROF 


^.^^^TEBf^^,: 


lionai  Bi 


BANKER^  T^ ST 

TheSeSnd'Hati'^n^VbanK 

OF    HOBOKEM, 
PRIOR    ENDORSEMENTS  GUAKANTCED 

Pay  Any  National  or  State  Bank. 

^  OR  ORDER. 

GLOBE  NATL  BAIJK.  BOSTON 


ci 

C 

v: 

c 

o 

<u 

^ 

o 

J5 

)  . 

"" 

C/5 

-^ 

c 

g 

<u 

52 

C 

O 

^ 

t3 

ci 

£ 

T3 

S 

S 

2 

^ 

<u 

,  , 

s 

•" 

3 

J3 

C 

.y 

l> 

— 

^ 

^ 

o 

'i 

^ 

o 

C/3 

1 

^, 

^ 

o 

OJ 

bfl 

u 

.s 

<u 

1 

<*. 

>4 

O 

J:<i 

03 

5i 

^6  CLEARING-HOUSES 

tution,  pursuing  the  same  commendable  policy,  remitted 
it  to  its  correspondent  at  Port  Jefferson.  The  First  Na- 
tional Bank  of  Port  Jefferson,  which  thus  got  possession 
of  the  check,  again  diverted  its  course  by  enclosing  it  to 
the  Far  Rockaway  Bank.  The  Far  Rockaway  Bank  sent 
it  back  to  New  York,  namely,  to  the  Chase  National 
Bank,  and  thus  this  much-travelled  check  made  its  sec- 
ond call  in  the  metropolis.  The  Chase  National  Bank,  it 
would  appear,  endeavored  to  correct  the  wanderer's 
course,  and  so  despatched  it  to  Riverhead,  to  H.  M. 
Reeve.  Mr.  Reeve,  either  because  he  really  knew  where 
to  send  it  for  collection,  or  because  of  a  lucky  hit,  for- 
warded it  to  the  Queens  County  Bank  of  Brooklyn,  which 
finally  sent  it  home  to  the  Peconic  Bank  of  Sag  Harbor, 
on  which  it  was  drawn. 

The  reason  why  banks  forward  checks  in  this  appar- 
ently unreasonable  way,  often  getting  the  items  far  out  of 
their  regular  course,  is  easy  to  explain.  It  sometimes 
appears  cheaper  to  the  one  who  has  the  check  in  hand 
to  enclose  it  with  other  items  to  some  regular  correspond- 
ent, who,  assumedly,  is  nearer  the  bank  on  which  the 
check  is  drawn,  than  to  hunt  up  a  special  correspondent 
for  it  alone.  Once  started,  the  poor  check  gets  pushed 
along  from  station  to  station,  on  its  erratic  course,  until 
such  time  as,  by  accident  or  otherwise,  it  finds  its  final 
lodgement. 

The  reader  may  estimate  for  himself  the  volume  of  cor- 
respondence which  this  one  check  caused,  from  the  time 
it  was  drawn  by  Woodward  Brothers  until  it  was  paid 
by  the  Peconic  Bank,  and  the  amount  of  the  postage  and 
cost  of  clerical  work  expended  upon  it.    No  better  argu- 


,6  HARBOR 


u 


78  CLEARING-HOUSES 

ment  than  the  facts  here  presented  is  needed  to  support 
the  proposition  of  charging  a  reasonable  sum  for  collect- 
ing out-of-town  checks.  No  better  illustration  than  this 
could  be  presented  to  the  business  man  for  demonstrat- 
ing to  him  the  weight  of  the  burden  he  puts  upon  the 
banking  machinery  of  the  community  by  remitting  his 
check  on  a  country  bank,  in  payment  of  an  account,  in- 
stead of  purchasing  exchange. 


CHAPTER  X 

CLEARING-HOUSE   LOAN   CERTIFICATES 

What  Clearing-house  Loan  Certificates  Are — Origin — Interest 
Rates— Uses— First  Issue  in  i860— The  Issues  of  1861,  I863, 
and  1864 — Action  of  Various  Clearing-houses  in  1873 — 
New  Orleans  in  1879— New  York  in  1884— Action  of  the 
New  York,  Boston,  and  Philadelphia  Clearing-house  Asso- 
ciations in  1890 — General  Resort  to  Loan  Certificates  in 
1 893— Emergency  Circulation  in  the  South— Boston  and 
Philadelphia  in  1895— New  Orleans  in  1 896— Calculations 
of  Interest. 

Clearing-house  certificates  are  of  two  kinds — those  is- 
sued upon  the  deposit  of  gold  and  those  issued  upon  the 
deposit  of  collateral  securities.  The  former  are  employed 
in  ordinary  times,  solely  as  a  method  of  economizing 
time  and  labor  and  reducing  risk  in  handling  large  sums 
of  money.  The  latter  are  employed  in  times  of  financial 
disturbance  or  panic,  and  although  both  are  intended  for 
use  solely  in  the  settlement  of  balances  at  the  clearing- 
house, the  circumstances  that  call  them  forth,  the  results 
effected  by  their  use,  and  the  part  they  play  in  banking 
economy  have  little  or  nothing  in  common.  The  certifi- 
cates issued  upon  the  deposit  of  gold  are  termed  "  Clear- 
ing-house certificates,"  and  those  issued  upon  the  de- 
posit  of  collateral  security  are   very   properly  termed 

79 


8o  CLEARING-HOUSES 

**  Clearing-house  loan  ccTtificates,"  with  which  latter 
only  are  we  here  concerned. 

Clearing-house  loan  certificates  may  he  defined  as 
temporary  loans  made  by  the  hanks  associatetl  together 
as  a  clearing-house  association,  to  the  members  thereof, 
for  the  purpose  of  settling  clearing-house  balances.  Such 
certificates  are  negotihble,  as  a  rule,  only  among  the  mem- 
bers of  the  association,  and  are  not  in  any  sense  to  be  re- 
garded as  currency.  They  are  not  even  seen  by  the  busi- 
ness community,  and  do  not  pass  from  bank  to  bank,  ex- 
cept in  payment  of  clearing-house  balances. 

To  obtain  an  intelligent  understanding  of  the  real  char- 
acter and  purpose  of  such  certificates,  it  will  be  well  to 
treat  somewhat  of  the  circumstances  under  which  they 
are  issued.  In  the  course  of  the  present  century  the 
United  States  has  undergone  periodical  derangements 
of  business  affairs,  when  confidence  was  displaced  by  mis- 
trust, when  the  payments  of  debts  became  difficult,  when 
property  values  tlcclined,  and  business  houses  failed; 
when  industry  and  trade  were  paralyzed,  and  general 
stagnation  ensued  in  all  lines  of  enterprise.  In  such  times 
depositors  in  banks,  stricken  with  fear  and  sometimes 
pressed  by  need,  draw  out  their  deposits,  in  many  cases 
to  such  an  extent  as  to  render  it  difiicult  or  even  impossi- 
ble for  the  banks  to  contract  their  loans  sufticiently  to 
meet  the  demands  thus  made  upon  them.  Under  our 
present  currency  system  there  is  no  method  of  expanding 
the  money  volume  as  occasion  demands,  whereby  the 
banks  can  continue  their  UvSual  loans  and  discounts,  and 
thus  prevent  a  panic,  w^ith  all  its  evil  consequences. 
Hence  it  is  left  in  a  large  measure  to  the  financiers  of  each 


CI.I-.AUINCMIOUSI-    LOAN    CF.RTIFICATKS  8l 

coniniunily  to  work  out  their  own  remedy,  su])pleinentcd 
by  sticli  mutual  assistance  as  a  courteous  regard  for  each 
other  may  dictate,  or  as  i)usiness  relations  may  demand. 

Quick  to  see  the  deficiency  in  our  currency  system  and 
the  desirability  of  in  some  way  supplying  it,  the  bankers 
of  New  York,  nearly  forty  years  ago,  devised  the  scheme 
of  issuing  clearing-house  loan  certificates  as  a  method 
of  relief  from  momentary  stringencies.  Subsequently, 
nearly  all  the  clearing-houses  in  the  great  centres  adopted 
the  same  device,  and  by  their  heroic  resort  to  the  meas- 
ure, they  have  at  different  times  relieved  the  business 
community  of  untold  disaster,  for  which  invaluable  ser- 
vice they  have  justly  received  the  grateful  recognition  of 
the  entire  country. 

The  great  value  of  clearing-house  loan  certificates 
consists  in  the  fact  that  they  take  the  place  of  money  in 
settlements  at  the  clearing-house,  and  hence  save  the  use 
of  so  much  actual  cash,  leaving  the  amount  to  be  used 
by  the  banks  in  making  loans  and  discounts,  and  in  meet- 
ing other  obligations.  The  volume  of  currency,  to  all  in- 
tents and  purposes,  is  expanded  by  this  means  to  the  full 
amount  of  the  certificates  issued. 

The  loan  certificates  are  taken  out  by  the  clearing- 
house members  through  loan  committees,  especially  ap- 
pointed, and  are  used,  as  a  rule,  only  in  the  payment  of 
balances  among  the  associated  banks.  Thus,  when  the 
stringency  in  the  money  market  seems  sufficient  to  de- 
mand it,  the  clearing-house  association  meets  and  ap- 
points a  committee  called  the  loan  committee,  consist- 
ing usually  of  five  bank  officers,  to  act  in  concurrence 
with  the  president  of  the  clearing-house  association,  who 


82  CLEARING-HOUSES 

serves  as  ex-oiHcio  member.  It  is  the  duty  of  such  com- 
mittee to  meet  each  morning  at  the  clearing-house  and 
examine  the  collateral  offered  as  security  by  the  banks, 
and  issue  loan  certificates  thereon,  in  such  denominations 
and  proportions  to  collaterals  deposited  as  may  be  agreed 
upon.  In  the  history  of  the  past  the  denominations  have 
varied  from  twenty-five  cents  to  twenty  thousand  dollars 
in  the  different  associations,  and  in  proportions  varying 
from  fifty  dollars  to  one  hundred  dollars  of  certificates,  to 
one  hundred  dollars  of  collateral  deposited. 

These  loan  certificates  bear  interest  at  rates  varying 
from  six  to  nine  per  cent,  per  annum,  payable  by  the 
banks  to  which  they  are  issued,  to  the  banks  receiving 
such  certificates  in  settlement  of  daily  balances.  Hence 
the  interest  charged  against  certain  banks  must  exactly 
equal  and  offset  that  credited  to  certain  other  banks. 
The  aim  is  to  fix  the  rates  sufficiently  high  to  insure  the 

\  retirement  of  the  certificates  as  soon  as  the  emergency 
which  called  them  forth  has  passed  by.  As  a  rule,  they 
are  retired  by  the  banks  which  take  them  out,  as  soon 
as  they  have  obtained  suf^cient  cash  to  meet  their  daily 
obligations.  Notice  is  given  by  the  debtor  banks  to  the 
committee,  calling  for  such  certificates  as  they  wish  to 
retire,  and  the  com'  littee  gives  notice  to  the  banks  hold- 

^ing  the  same,  stating  that  the  interest  will  cease  after  a 
specified  date.  In  due  course  the  holders  send  the  cer- 
tificates to  the  clearing-house  for  redemption.  Upon 
the  retirement  of  the  certificates,  the  collateral  deposited 
as  security  is  surrendered  by  the  committee  in  the  same 
proportion  to  certificates  surrendered  as  was  required  for 
deposit. 


CLEARING-HOUSE   LOAN    CERTIFICATES  83 

It  is  by  no  means  the  general  practice  for  all  the  mem- 
bers to  take  out  loan  certificates  when  issues  are  arranged 
by  the  association.  Some  banks  are  in  such  condition  as 
to  be  able  to  weather  the  storm  without  them,  while  others 
are  weak  and  in  great  need  of  relief.  Some  banks  regard 
their  use  of  clearing-house  loan  certificates  as  a  reflection 
upon  their  standing,  and  hence  refuse  to  apply  for  them 
until  driven  to  it  by  sheer  necessity.  Others  regard  it 
as  in  no  way  prejudicial  to  their  interests,  but  rather  as 
a  patriotic  movement  in  which  all  the  banks  should  en- 
gage, both  for  the  purpose  of  assisting  their  fellow-mem- 
bers and  for  the  welfare  of  the  community  as  a  whole. 

The  members  of  the  New  York  Clearing-house  es- 
pecially have  distinguished  themselves  in  this  regard. 
However  strong  certain  members  may  have  been,  and 
however  easily  they  might  have  gotten  on  without  using 
loan  certificates,  it  has  been  almost  the  universal  rule  for 
all  the  members  to  take  out  loan  certificates  whenever 
the  occasion  demanded  such  action  on  the  part  of  any  of 
the  banks.  In  one  instance,  when  a  member-bank  re- 
fused to  share  the  burdens  of  the  associated  banks,  it 
was  suspended  from  the  privileges  of  the  clearing-house 
for  more  than  three  months. 

The  total  amount  of  its  balances  is  not  always  paid  in 
clearing-house  loan  certificates  by  a  bank  to  which  such 
certificates  have  been  issued.  Thus,  for  example,  the 
debit  balance  of  a  given  bank  may  be  five  hundred  thou- 
sand dollars,  which  in  ordinary  times  would  be  paid  in 
money  or  gold  certificates.  In  a  time  of  panic,  a  part  of 
this  sum,  say  three  hundred  thousand  dollars,  is  paid  in 
clearing-house  loan  certificates  and  the  remaining  two 


84  CLEARING-HOUSES 

hundred  thousand  dollars  in  currency.  Another  bank, 
with  the  same  balance,  might  pay  the  whole  in  loan  cer- 
tificates, while  still  another  would  pay  the  full  amount 
without  the  use  of  any  certificates  whatsoever. 

The  first  issue  of  clearing-house  loan  certificates  oc- 
curred in  i860.  In  the  autumn  of  that  year  there  was  a 
rapid  shrinkage  in  bank  deposits,  and  a  corresponding 
contraction  in  loans  and  discounts.  The  situation  grew 
more  and  more  serious  as  the  end  of  the  year  approached. 
The  presidential  election  was  a  disturbing  factor  of  more 
than  ordinary  significance.  Immediately  succeeding  the 
election  of  Abraham  Lincoln  to  the  presidency,  the  situa- 
tion began  to  assume  a  critical  aspect.  Distrust  and  un- 
certainty were  universally  felt.  The  banks  hesitated  to 
advance  loans,  and  obtained  from  their  customers  the 
payment  of  obligations  as  rapidly  as  possible.  Call  loans 
commanded  seven  per  cent.,  and  paper  of  some  of  the 
best  houses  went  begging  at  twenty-four  per  cent.  In 
this  crisis  a  meeting  of  the  New  York  Clearing-house 
Association  was  called,  and  the  following  resolution  was 
passed : 

"  In  order  to  enable  the  banks  of  the  City  of  New  York 
to  expand  their  loans  and  discounts,  and  also  for  the  pur- 
pose of  facilitating  the  settlement  of  the  exchanges  be- 
tween the  banks,  it  is  proposed  that  any  bank  in  the  Clear- 
ing-house Association  may,  at  its  option,  deposit  with  a 
committee  of  five  persons — to  be  appointed  for  that  pur- 
pose— an  amount  of  its  bills  receivable,  United  States 
stocks,  treasury  notes,  or  stocks  of  the  State  of  New  York, 
to  be  approved  by  said  committee,  who  shall  be  author- 
ized to  issue  thereon  to  said  depositing  bank  certificates  of 


CLEARING-HOUSE   LOAN    CERTIFICATES  85 

deposit,  bearing  interest  at  seven  per  cent,  per  annum,  in 
denominations  of  five  thousand  dollars  and  ten  thousand 
dollars  each,  as  may  be  desired,  to  an  amount  equal  to  sev- 
enty-five per  cent,  of  such  deposit.  These  certificates  may 
be  used  in  the  settlement  of  balances  at  the  clearing- 
house, for  a  period  of  thirty  days  from  the  date  thereof, 
and  they  shall  be  received  by  creditor  banks  during  that 
period,  daily,  in  the  same  proportion  as  they  bear  to  the 
aggregate  amount  of  the  debtor  balances  paid  at  the 
clearing-house.  The  interest  which  may  accrue  upon 
these  certificates  shall,  at  the  expiration  of  thirty  days,  be 
apportioned  among  the  banks  which  shall  have  held  them 
during  the  time. 

"  The  securities  deposited  with  said  committee  as 
above  named,  shall  be  held  by  them  in  trust  as  a  special 
deposit,  pledged  for  the  redemption  of  the  certificates  is- 
sued thereupon. 

"  The  committee  shall  be  authorized  to  exchange  any 
portion  of  said  securities  for  an  equal  amount  of  others, 
to  be  approved  by  them  at  the  request  of  the  depositing 
bank,  and  shall  have  power  to  demand  additional  security, 
either  by  an  exchange  or  an  increased  amount,  at  their 
discretion. 

''  The  amount  of  certificates  which  this  committee 
may  issue,  as  above  stated,  shall  not  exceed  five  million 
dollars.* 

''  This  agreement  shall  be  binding  upon  the  Clearing- 
house Association  when  assented  to  by  three-fourths  of 
its  members. 

*  On  December  3,  i860,  it  was  voted  to  increase  this  limit  to  ten 
million  dollars. 


86  CLEARING-HOUSES 

"  Resolved,  That  in  order  to  accomplish  the  purpose 
set  forth  in  this  agreement,  the  specie  belonging  to  the 
associated  banks  shall  be  considered  and  treated  as  a 
common  fund  for  mutual  aid  and  protection,  and  the  com- 
mittee shall  have  power  to  equalize  the  same  by  assess- 
ment or  otherwise. 

"  For  this  purpose  statements  shall  be  made  to  the 
committee  of  the  condition  of  each  bank  on  the  morning 
of  every  day  before  the  commencement  of  business,  which 
shall  be  sent  with  the  exchanges  to  the  manager  of  the 
clearing-house,  specifying  the  following  items,  namely: 
I.  Loans  and  discounts.  2.  Deposits.  3.  Loan  certifi- 
cates.   4.  Specie." 

In  accordance  with  the  authority  thus  given,  the  first 
issue  of  certificates  was  made  November  23,  i860,  and 
the  beneficial  efifect  was  immediately  felt.  The  banks 
rapidly  extended  their  loans,  deposits  increased,  and  com- 
mercial paper,  which  formerly  could  not  be  sold  at  twenty 
per  cent.,  was  now  freely  marketed  at  seven  per  cent. 
and  eight  per  cent.  On  December  22d  the  issue  had 
reached  its  maximum  limit,  namely,  six  million  eight 
hundred  and  sixty  thousand  dollars.  The  aggregate  issue 
was  seven  million  three  hundred  and  seventy-five  thou- 
sand dollars.  The  last  certificate  was  cancelled  March  9, 
1 86 1,  and  the  total  period,  from  the  date  of  the  first  issue 
to  the  date  of  the  last  issue,  was  one  hundred  and  six  days. 

But  the  relief  thus  afforded  was  not  destined  to  be 
permanent.  The  country  was  soon  plunged  into  the 
throes  of  civil  war,  and,  consequently,  distrust  and  un- 
certainty as  to  the  future  universally  prevailed.  Business 
interests  were  suspended,  trade  was  hampered,  and  in- 


CLEARING-HOUSE    LOAN    CERTIFICATES  87 

dustry  was  paralyzed.  As  a  result  of  the  pressure,  the 
association  passed  a  resolution  in  the  following  Septem- 
ber, authorizing  another  issue  of  loan  certificates,  and  on 
September  19,  1861,  the  first  issue  was  made.  The  maxi- 
mum of  twenty-one  million  nine  hundred  and  sixty  thou- 
sand dollars  was  reached  on  February  7,  1862,  and,  as 
will  be  perceived,  was  more  than  three  times  as  much  as 
the  maximum  amount  outstanding  at  any  one  time  in 
the  preceding  year.  The  total  issue  was  twenty-two  mill- 
ion five  hundred  and  eighty-five  thousand  dollars,  ex- 
ceeding the  previous  total  issue  by  more  than  fifteen 
milHon  dollars.  The  rate  of  interest  was  six  per  cent.,  as 
compared  with  seven  per  cent,  in  the  former  year,  and 
the  collateral  used  as  security  consisted  of  temporary  re- 
ceipts of  the  United  States  for  the  purchase  of  govern- 
ment bonds,  as  compared  with  United  States  stock,  treas- 
ury notes,  and  stocks  of  the  State  of  New  York  employed 
for  the  same  purpose  in  the  preceding  issue.  The  last 
certificates  were  called  April  28,  1862,  more  than  seven 
months  from  the  date  of  the  first  issue. 

In  1863  the  association  issued  certificates  for  the  third 
time.  The  first  bore  date  of  November  6th,  and  the  larg- 
est amount  outstanding  at  any  one  time  was  nine  million 
six  hundred  and  eight  thousand  dollars,  from  Novem- 
ber 27th  to  December  ist.  The  total  issue  was  eleven 
million  four  hundred  and  seventy-one  thousand  dollars, 
being  a  little  more  than  one-half  the  issue  of  two  years  be- 
fore. Interest  was  charged  at  six  per  cent.,  as  in  1861, 
and  United  States  or  New  York  State  stocks,  bonds,  etc., 
or  temporary  receipts,  as  in  1861,  were  used  as  security. 
The  last  certificates  were  redeemed  February  i,   1864, 


88  CLEARING-HOUSES 

four  and  one-half  months  from  the  date  of  the  first 
issue. 

Owing  to  the  prolongation  of  the  war,  with  the  con- 
sequent unrest  in  business  circles,  the  issue  of  the  cer- 
tificates, for  the  fourth  time,  began  March  7,  1864,  and 
reached  its  maximum,  sixteen  million  four  hundred  and 
eighteen  thousand  dollars,  on  April  20th  of  the  same  year, 
being  an  excess  of  nearly  seven  million  dollars  over  the 
maximum  amount  outstanding  at  any  one  time  in  the 
previous  year.  The  aggregate  issue  was  seventeen  mill- 
ion seven  hundred  and  twenty-eight  thousand  dollars, 
being  less  than  one  million  dollars  in  excess  of  the  maxi- 
mum amount  outstanding  at  one  time.  The  rate  of  in- 
terest was  six  per  cent.,  as  in  1861  and  1863,  and  the  cer- 
tificates were  secured  by  the  same  kind  of  collateral  as 
those  in  the  former  issue.  The  final  redemption  occurred 
June  13,  1864,  three  and  one-half  months  after  the  first 
certificates  were  issued. 

No  more  loan  certificates  were  issued  until  the  year 
1873,  when,  for  the  first  time,  the  clearing-house  associa- 
tions of  other  cities,  seeing  their  great  practical  utility, 
began  to  avail  themselves  of  their  use.  In  the  year  men- 
tioned, the  association  at  New  York  followed  the  prece- 
dent established  in  i860,  and  the  same  course  was  taken 
by  the  clearing-house  associations  at  Boston,  Philadel- 
phia, Baltimore,  Cincinnati,  St.  Louis,  and  New  Orleans. 
The  panic  which  called  forth  such  united  action  was  one 
of  unusual  severity.  It  reached  its  climax  in  September, 
and  so  severe  were  its  ravages  that  the  New  York  Stock 
Exchange  closed  its  doors  on  the  20th  of  the  same  month, 
for  an  indefinite  period,  but  reopened  them  ten  days 
thereafter. 


o 


(^ommltUt. 


•^ 


3a 


CO 


■^^-^^ 


3 


3    S    3 

>,  a.  5   o 


•eMT^^oOT  c[MT.^a©iii  M®i 


a 


o  .c 

.s  « 

U  ^ 
^  .2 


o 

I 

0 


90  CLEARING-HOUSES 

The  usual  resolutions  were  passed  by  the  Clearing- 
house Association,  authorizing  the  issue  of  certificates, 
and  on  September  226.  the  first  issue  was  made.  The 
amount  was  fixed  at  the  outset  at  ten  million  dollars, 
which,  with  the  announcement  that  the  government 
would  purchase  the  same  amount  of  bonds,  caused  an 
immediate  subsidence  of  the  panic,  and  in  less  than 
three  days  its  most  acute  stages  were  over.  The  last 
issue  was  made  on  November  20th,  a  little  less  than  two 
months  from  the  date  of  the  first  issue,  and  the  last  cer- 
tificates were  redeemed  January  14th  of  the  following 
year,  the  period  covered  from  the  date  of  the  first  issue 
to  the  date  of  final  cancellation  having  been  less  than  four 
months.  During  the  two  months  referred  to,  certificates 
to  the  amount  of  twenty-six  million  five  hundred  and 
sixty-five  thousand  dollars  were  issued.  This  was  far  in 
excess  of  any  previous  issue,  the  nearest  approach  to  it 
having  been  in  1861,  when,  as  shown  before,  more  than 
twenty-two  million  dollars  were  taken  out.  The  largest 
amount  outstanding  at  any  one  time  was  twenty-two 
million  four  hundred  and  ten  thousand  dollars,  which  oc- 
curred only  eleven  days  from  the  date  of  issue  of  the  first 
certificates.  Interest  was  calculated  at  seven  per  cent.,  as 
in  i860,  the  rate  during  the  intervening  time  having  been 
six  per  cent.  Bills  receivable,  stocks,  bonds,  and  other 
securities  were  accepted  by  the  committee  as  collaterals 
for  the  redemption  of  these  certificates. 

Attempts  on  the  part  of  the  business  community  were 
made  in  vain  to  discover  what  banks  had  taken  out  cer- 
tificates, but  such  information  was  very  wisely  withheld. 
For  more  than  two  months,  covering  the  worst  period  of 


CLEARING-HOUSE    LOAN    CERTIFICATES 


91 


the  panic,  no  weekly  statements  of  their  condition  were 
made  to  the  clearing-house  by  the  banks,  the  object  being 
to  prevent  a  general  knowledge  of  the  weak  condition  of 
some  of  the  members,  which  condition,  if  disclosed,  would 
invite  runs  upon  them. 

On  September  2^,  1873,  a  meeting  of  the  Boston  As- 
sociation was  called,  and  it  was  voted  to  suspend  currency 
payments,  and  appoint  a  loan  committee,  with  power 
to  issue  loan  certificates  to  the  amount  of  ten  million  dol- 
lars, upon  substantially  the  same  basis  as  at  New  York. 
The  issues  were  duly  made,  and  on  October  20th  the 
amount  outstanding  reached  its  maximum  of  ap- 
proximately four  million  eight  hundred  thousand  dol- 
lars. 

In  like  manner,  the  Philadelphia  Association  now,  for 
the  first  time,  entered  upon  the  plan  so  successfully  fol- 
lowed in  New  York  since  i860,  by  appointing  a  loan 
committee,  with  authority  to  issue  clearing-house  loan 
certificates.  Such  certificates  were  authorized  by  resolu- 
tion, adopted  September  24,  1873,  and  amended  Octo- 
ber 18,  1873,  to  read  as  follows : 

"  For  the  purpose  of  enabling  the  banks,  members  of 
the  Philadelphia  Clearing-house  Association,  to  afTord 
proper  assistance  to  the  mercantile  and  manufacturing 
community,  and  also  to  facilitate  the  inter-bank  settle- 
ments resulting  from  their  daily  exchanges,  we,  the 
undersigned,  do  bind  ourselves  by  the  following  agree- 
ment on  the  part  of  our  respective  banks,  namely : 

"First.  That  the  clearing-house  committee  be  and  that 
they  are  hereby  authorized  to  issue  to  any  bank,  member 
of  the  association,  loan  certificates  bearing  six  per  cent. 


92  CLEARING-HOUSES 

interest  on  the  deposits  of  bills  receivable  and  other 
securities  to  such  an  amount  and  to  such  percentage 
thereof  as  may  in  their  judgment  be  advisable.  These 
certificates  may  be  used  in  settlement  of  balances  at  the 
clearing-house,  and  they  shall  be  received  by  creditor 
banks  in  the  same  proportion  as  they  bear  to  the  aggre- 
gate amount  of  the  debtor  balances  paid  at  the  clearing- 
house. The  interest  that  may  accrue  upon  these  certifi- 
cates shall  be  apportioned  monthly  among  the  banks 
w^hich  shall  have  held  them  during  that  time. 

''  Second.  The  securities  deposited  with  the  said  com- 
mittee shall  be  held  by  them  in  trust  as  a  special  deposit, 
pledged  for  the  redemption  of  the  certificates  issued 
thereupon,  the  same  being  accepted  by  the  committee 
as  collateral  security,  v^ith  the  express  condition  that 
neither  clearing-house  association,  the  clearing-house 
committee,  nor  any  member  thereof  shall  be  responsible 
for  any  loss  on  said  collaterals  arising  from  failure  to 
make  demand  and  protest,  or  from  any  other  neglect  or 
omission  other  than  the  refusal  to  take  some  reasonable 
step  v^hich  the  said  depositing  bank  may  have  previously 
required  in  wanting. 

"  Third.  On  the  surrender  of  such  certificates,  or  any 
of  them  by  the  depositing  bank,  the  committee  v^ill  in- 
dorse the  amount  as  a  payment  on  the  obligation  of  said 
bank  held  by  them,  and  will  surrender  a  proportionate 
amount  of  securities,  except  in  cases  of  default  of  the  bank 
in  any  of  its  transactions  through  the  clearing-house,  in 
which  case  the  securities  will  be  applied  by  the  committee, 
first  to  the  payment  of  outstanding  certificates  with  in- 
terest; next  to  the  liquidation  of  any  indebtedness  of  such 


COMMITTEE.- 


1  I 


I  i 

S      o 


.2       t 


1  1 
1  i 


I  1 1 
1  i  I 


ss 


[xvoijij-izao  Jfiro-T 


s^ 


s€ 


(!$ 


OK  THi: 

UNIVf^RsiTY 


P^^ 


a\^. 


94  CLEARING-HOUSES 

bank  to  the  other  banks,  members  of  the  Clearing-house 
Association. 

''  Fourth.  The  committee  shall  be  authorized  to  ex- 
change any  portion  of  said  securities  for  others,  to  be 
approved  by  them,  and  shall  have  power  to  demand  ad- 
ditional securities  at  their  own  discretion. 

''  Fifth.  That  the  clearing-house  committee  be  au- 
thorized to  carry  into  full  effect  this  agreement,  with 
power  to  establish  such  rules  and  regulations  for  the 
practical  working  thereof  as  they  may  deem  necessary; 
and  any  loss  caused  by  the  non-payment  of  loan  certifi- 
cates shall  be  assessed  by  the  committee  upon  all  the 
banks  in  the  ratio  of  capital. 

''  Sixth.  The  expenses  incurred  in  carrying  out  this 
agreement  shall  be  assessed  upon  the  banks  in  equal  pro- 
portion to  their  respective  capitals. 

"  Seventh.  That  the  clearing-house  committee  be  and 
they  are  hereby  authorized  to  terminate  this  agreement, 
upon  giving  thirty  days'  notice  thereof,  at  any  stated 
meeting  of  the  Clearing-house  Association." 

The  issue  of  certificates  made  in  conformity  with  the 
foregoing  resolution  reached  the  maximum  amount  out- 
standing at  one  time,  namely,  six  million  two  hun- 
dred and  eighty-five  thousand  dollars,  on  December  i, 

1873. 
At  Baltimore,  on  September  24th,  the  clearing-house 

association    began    the    issue    of    certificates,    which 

amounted  in  the  aggregate  to  one  million  three  hundred 

and  twenty-six  thousand  dollars.    The  last  of  these  was 

retired  January  2,  1874,  one  hundred  days  after  the  date 

of  the  first  issue. 


CLEARING-HOUSE    LOAN    CERTIFICATES  95 

The  first  certificates  at  St.  Louis  were  issued  on  Sep- 
tember 25th,  and  the  last  of  the  certificates  were  cancelled 
forty-six  days  thereafter,  the  aggregate  amount  having 
been  one  million  four  hundred  and  seventy-two  thou- 
sand five  hundred  dollars. 

At  New  Orleans  the  maximum  amount  outstanding 
(one  million  and  sixty-seven  thousand  dollars)  was  at- 
tained October  loth. 

On  September  25th  the  following  resolution  was 
adopted  by  the  association  at  Cincinnati : 

''  Resolved,  That  for  the  protection  of  our  commercial 
interests  and  for  the  purpose  of  preventing  a  drain  of  cur- 
rency from  the  banks  and  bankers  of  this  city,  the  banks 
and  bankers  of  Cincinnati  do  hereby  agree  to  adopt  sub- 
stantially the  plan  adopted  in  New  York  City,  namely, 
they  will  not  pay  out  currency  on  checks,  except  for  small 
sums,  to  be  optional  with  the  banks  and  bankers  on  whom 
they  are  drawn;  but  they  will  certify  checks  drawn  on 
balances  in  their  hands,  payable  through  the  clearing- 
house only.  When  such  checks  are  drawn  in  payment  of 
notes  or  drafts,  the  bank  holding  the  same  shall  not  be 
required  to  deliver  said  paper  until  after  the  check  in 
payment  has  been  paid  to  the  clearing-house. 

"  Resolved,  That  the  above  resolution  be  printed,  and 
slips  furnished  each  bank  and  banker. 

''Resolved,  That  the  Clearing-house  Association  will  is- 
sue not  to  exceed  two  million  five  hundred  thousand  dol- 
lars in  loan  certificates,  to  be  used  in  settling  balances 
between  the  members  thereof,  and  that  the  same  will  be 
furnished  to  members  in  the  proportion  of  securities  put 
up  by  each  as  hereinafter  provided.    Said  certificates  shall 


96  CLEARING-HOUSES 

not  be  negotiable,  and  shall  be  used  only  for  the  purpose 
of  settlement  between  the  banks  and  bankers  in  the  clear- 
ing-house. 

"  Resolved,  That  members  may  deposit  as  a  basis  of 
credit  in  the  association  the  following  described  securi- 
ties, namely,  United  States  bonds,  railroad  and  other 
bonds,  stocks  and  bills  receivable.  The  United  States 
bonds  shall  be  received  at  their  par  or  face  value,  and  the 
other  securities  shall  be  valued  by  a  committee  of  five, 
who  shall  be  appointed  for  that  purpose,  and  the  same 
shall  be  received  at  seventy-five  per  cent,  of  the  value  so 
fixed.  Each  member  shall  receive  a  receipt  for  the  se- 
curities deposited.  The  said  committee  shall  have  charge 
of  the  securities  of  whatsoever  kind  deposited  by  the  said 
banks  and  bankers,  and  shall  place  the  same  with  the  safe 
deposit  company  for  safe-keeping,  and  the  said  commit- 
tee shall  sit  daily  at  the  clearing-house  at  the  hour  for 
clearing  and  shall  personally  supervise  the  issue  of  the 
loan  certificates  in  settlement  of  balances.  The  said  cer- 
tificates shall  bear  interest  at  the  rate  of  eight  per  cent, 
per  annum,  which  interest  shall  be  paid  by  the  banks  and 
bankers  using  the  same  and  for  the  time  so  used. 

"  Resolved,  That  these  proceedings  take  efTect  from 
and  after  9  o'clock  to-day,  and  are  not  to  affect  currency 
transactions  or  obligations  between  members  prior  to 
this  day." 

In  the  period  from  September  25th,  when  the  issue  of 
certificates  was  authorized,  to  October  9th,  when  a  reso- 
lution was  unanimously  adopted  in  favor  of  discontinuing 
their  issue,  a  period  of  only  fourteen  days,  certificates  to 
the  amount  of  five  hundred  and  fifteen  thousand  four 


CLEARING-HOUSE    LOAN    CERTIFICATES  97 

hundred  dollars  were  issued,  the  last  of  which  were  can- 
celled just  six  weeks  from  the  date  of  first  issue. 

The  next  report  of  clearing-house  loan  certificates  was 
in  1879,  when  the  New  Orleans  Association  alone  issued 
a  small  amount  (fifty-four  thousand  dollars)  to  satisfy  con- 
ditions of  a  purely  local  character. 

In  1884  the  New  York  Association  stood  alone  in  the 
issue  of  loan  certificates.  The  amount  taken  out  at  this 
time  was  large,  and  was  begun  early  in  the  year  to  pre- 
vent a  wide-spread  and  disastrous  panic.  The  first  were 
taken  out  May  15th,  and  reached  twenty-one  million 
eight  hundred  and  eighty-one  thousand  dollars,  their 
maximum  amount  outstanding  on  May  24th,  only  nin^e 
days  from  the  date  of  first  issue.  The  last  certificates 
were  issued  June  6th,  and  the  last  were  retired  September 
23d,  more  than  four  months  from  the  date  on  which  the 
issue  was  begun.  The  total  amount  was  twenty-four 
million  nine  hundred  and  fifteen  thousand  dollars,  being 
in  excess  of  any  previous  issue,  except  that  of  1873.  The 
rate  of  interest  was  fixed  at  six  per  cent.,  the  same  as  in 
1 86 1,  1863,  and  1864,  and,  as  security  for  the  redemption 
of  such  certificates,  bills  receivable,  stocks,  bonds,  and 
other  securities  were  employed. 

For  the  next  six  years  the  country  was  free  from  any 
unusual  financial  disturbances,  and  hence  no  occasion 
arose  for  extraordinary  measures.  Finally,  however,  in 
1890,  came  another  period  of  pressure.  Up  to  midsum- 
mer of  that  year  the  country  had  experienced  unusual 
prosperity,  but  to  the  observing  eye  it  was  apparent  that 
deep-seated  forces  were  at  work,  which  would  ultimately 
cause  a  wide-spread  disturbance  in  business  and  financial 


98  CLEARING-HOUSES 

circles,  if  not  bring  about  a  disastrous  panic.  This  was 
evident  from  consideration  of  the  unsatisfactory  condi- 
tions prevaiHng  in  agriculture  and  from  the  unwholesome 
tendency  to  overtrading  and  expansion  on  every  hand. 
The  extension  of  railroads  had  been  prosecuted  through- 
out the  year  with  more  than  ordinary  vigor,  which  re- 
quired the  extension  of  large  sums  of  money  upon  se- 
curity. Early  in  the  year  the  deposits  in  the  banks  of 
New  York  City  began  to  fall  off,  and  by  May  17th  the 
shrinkage  had  amounted  to  more  than  forty-four  million 
eight  hundred  and  thirty-one  thousand  dollars,  of  which 
over  thirteen  million  five  hundred  thousand  dollars  con- 
sisted of  balances  drawn  out  by  banks  in  the  interior  and 
in  other  reserve  cities.  Boston  and  Philadelphia  were 
also  subjected  to  heavy  drains.  After  careful  considera- 
tion, it  was  decided  in  each  of  these  three  cities  to  resort 
to  the  issue  of  clearing-house  loan  certificates,  to  be  used 
in  the  settlement  of  clearing-house  balances.  New  York 
was  the  first  to  take  action,  and  on  November  nth,  at  a 
meeting  of  the  association,  the  following  resolution  was 
unanimously  adopted : 

"  Resolved,  That  a  committee  of  five  be  appointed  by 
the  chair,  of  which  the  chairman  shall  be  one,  to  receive 
from  banks,  members  of  the  association,  bills  receivable 
and  other  securities  to  be  approved  by  said  committee, 
who  shall  be  authorized  to  issue  therefor  to  such  deposit- 
ing banks,  loan  certificates  bearing  interest  at  six  per 
cent,  per  annum,  and,  in  addition  thereto,  a  commission 
of  one-quarter  of  one  cent  for  every  thirty  days  such  cer- 
tificates shall  remain  unpaid,  and  such  loan  certificates 
shall  not  be  in  excess  of  seventy-five  per  cent,  of  the  mar- 


CLEARING-HOUSE    LOAN    CERTIFICATES  99 

ket  value  of  the  securities  or  bills  receivable  so  deposited, 
and  such  certificates  shall  be  received  and  paid  in  settle- 
ment of  balances  at  the  clearing-house." 

In  pursuance  of  the  authority  thus  granted,  the  com- 
mittee of  five  was  duly  appointed,  and  they  proceeded  to 
issue  to  applying  banks  loan  certificates  in  form  sub- 
stantially the  same  as  that  employed  in  1873 — elsewhere 
illustrated — which,  in  fact,  with  the  exception  of  the 
limitation  of  time,  is  the  form  standard  with  this  asso- 
ciation. 

The  first  certificates  were  issued  November  12,  1890, 
and  the  issue  ceased  December  22d,  amounting  in  the 
aggregate  to  sixteen  million  six  hundred  and  forty-five 
thousand  dollars;  the  largest  amount  outstanding  at 
any  one  time  was  fifteen  million  two  hundred  and  five 
thousand  dollars,  on  December  12th,  and  the  last  certifi- 
cates were  retired  February  7,  1891,  less  than  three 
months  from  the  date  of  first  issue.  In  order  to  provide 
for  the  retirement  of  these  certificates,  in  case  the  col- 
lateral should  be  found  insufificient,  the  boards  of  di- 
rectors of  the  several  associated  banks  passed  the  follow- 
ing resolution : 

"  Resolved,  That  any  loss  resulting  from  the  issue  of 
loan  certificates  shall  be  borne  by  the  banks  comprising 
the  Clearing-house  Association,  pro  rata  to  capital  and 
surplus,  and  this  resolution  shall  be  ratified  by  the  boards 
of  the  respective  banks,  members  of  the  association,  and  a 
certified  copy  of  such  consent  delivered  to  the  chairman 
of  the  loan  committee." 

On  November  27th,  five  days  after  special  action  was 
begun  by  the  Clearing-house  Association  of  New  York, 


lOO  CLEARING-HOUSES 

the  clearing-house  association  at  Boston  entered  upon 
a  similar  course,  by  passing  the  following  resolution : 

''  Resolved,  That  a  committee  of  five  be  appointed  by 
the  chair,  of  which  committee  the  chairman  also  shall 
be  a  member,  to  receive  from  banks,  members  of  the 
association,  bills  receivable  and  other  securities,  to  be  ap- 
proved by  said  committee,  who  shall  be  authorized  to  is- 
sue therefor,  to  such  depositing  banks,  loan  certificates 
bearing  interest  at  7.3  per  cent,  per  annum,  and  such 
loan  certificates  shall  not  be  in  excess  of  seventy-five  per 
cent,  of  the  market  value  of  the  securities  or  bills  receiv- 
able so  deposited,  and  such  certificates  shall  be  received 
and  paid  in  settlement  of  balances  at  the  clearing-house." 

It  is  worthy  of  remark  that  the  basis  upon  which  the 
payment  of  any  loss  arising  from  the  issue  of  loan  cer- 
tificates differed  from  that  at  New  York,  in  that  in  the 
one  case  it  was  required  to  be  paid  by  the  banks  in  pro- 
portion to  capital  and  surplus,  and  in  the  other  in  pro- 
portion to  the  average  daily  amount  of  exchanges  which 
each  bank  had  sent  to  the  clearing-house  during  the  pre- 
ceding year.  The  resolution  bearing  upon  this  point, 
adopted  at  Boston,  was  as  follows : 

"  Resolved,  That  any  loss  arising  from  the  issue  of  loan 
certificates  shall  be  borne  by  the  banks  comprising  the 
Clearing-house  Association,  pro  rata  according  to  the 
average  daily  amount  which  each  bank  shall  have  sent 
to  the  clearing-house  during  the  preceding  year." 

It  was  also  voted  that  this  resolution  should  be  ratified 
by  the  boards  of  directors  of  the  respective  banks,  mem- 
bers of  the  association,  and  a  certified  copy  of  such  con- 
sent delivered  to  the  chairman  of  the  loan  committee. 


CLEARING-HOUSE   LOAN    CERTIFICATES  lOI 

Upon  deposit  of  securities  with  the  clearing-house 
committee  and  the  receipt  of  certificates  therefor,  each 
bank  was  required  to  execute  and  dehver  an  obHgation 
in  the  following  form : 

"  The Bank  has  this  day  received  of loan 

committee  of  the  Boston  Clearing-house  Association, 
loan  certificates  issued  by  said  committee  in  pursuance 
of  a  vote  of  said  association,  passed  November  17,  1890, 

to  the  amount  of thousand  dollars,  and  has  deposited 

with  said  committee  the  securities,  a  statement  whereof 

is  hereto  annexed,  and  said bank  has  received  said 

loan  certificates  on  the  terms  set  forth  in  said  vote,  and 
agrees  to  pay  the  amount  of  said  certificates,  with  interest 
thereon,  as  provided  in  said  vote." 

The  first  certificates  were  taken  out  November  19th, 
two  days  after  the  adoption  of  the  resolution  authoriz- 
ing such  action,  and  the  last  were  issued  December  6th, 
when  the  amount  reached  its  maximum  of  five  million  and 
sixty-five  thousand  dollars.  The  last  of  the  issue  were 
finally  cancelled  January  6,  1891,  less  than  two  months 
after  the  first  issue. 

On  November  18,  1890,  similar  proceedings  were  had 
by  the  Clearing-house  Association  of  Philadelphia,  at 
which  time  the  following  resolution  was  passed : 

"  Resolved,  That  in  accordance  with  resolution  of  Sep- 
tember 24,  1873,  as  amended  October  18,  1873,  the  clear- 
ing-house committee  will  issue  loan  certificates  to  banks 
applying,  and  receive  them  in  payment  of  balances." 

The  resolution  of  September  24,  1873,  ref<?rr6d:tp,  has 
already  been  quoted.  On  November  18,  1896^,  th^  clear- 
ing-house committee  passed  the  resoluHpJi-.which;  »liad 


I02  CLEARING-HOUSES 

been  adopted  on  that  day  by  the  clearing-house  associa- 
tion, affirming  their  purpose  to  issue  clearing-house  loan 
certificates  as  in  accordance  with  the  resolution  of  1873. 

Acting  under  the  authority  thus  granted,  the  clearing- 
house committee  began  the  issue  of  clearing-house  cer- 
tificates, and  the  banks  desiring  to  take  them  out  were 
required  to  adopt  a  resolution  empowering  the  hypothe- 
cation of  acceptable  securities,  under  which  resolution  the 
first  issue  of  certificates  was  made  on  November  19,  1890, 
and  ceased  May  22,  1891.  The  total  issue  was  nine 
million  six  hundred  and  fifty-five  thousand  dollars,  and 
the  maximum  issue  (eight  milHon  eight  hundred  and 
seventy  thousand  dollars)  was  reached  January  9,  1891. 
The  certificates  were  all  retired,  excepting  one  hundred 
and  seventy  thousand  dollars  issued  to  the  Keystone  and 
Spring  Garden  National  Banks,  institutions  which  were 
carried  down  in  the  panic. 

In  1 89 1  Louisville,  Ky.,  issued  loan  certificates  to  a 
small  amount,  although  none  were  required  in  the  pre- 
vious year,  when  New  York,  Boston,  and  Philadelphia 
were  employing  them  extensively.  This  clearing-house 
was  the  only  one  to  use  certificates  that  year,  and  what 
further  distinguishes  this  association  is  that  the  issue  re- 
ferred to  is  the  only  one  it  has  ever  made. 

Following  the  panic  of  1890  came  a  period  of  prosper- 
ity, which,  to  all  outward  seeming,  bore  the  marks  of 
permanence,  but  it  was  only  temporary.  The  clouds 
which  began  to  appear  prior  to  the  advent  of  the  Cleve- 
land ^d?Tiinistration,  grew  denser  as  time  advanced,  until 
ill  April,'  1893,,  it  was  apparent,  even  to  the  superficial  ob- 
i  \;\  C'.  i5^Wv,jt?T4ta , storm  of  unusual  severity  was  approaching. 


CLEARING-HOUSE   LOAN    CERTIFICATES  103 

Reports  of  failures,  as  given  by  commercial  agencies, 
showed  a  rapid  increase  as  the  year  advanced,  and  the 
shrinkage  in  national  bank  deposits  from  May  4th  to 
July  1 2th  exceeded  one  hundred  and  ninety  million  dol- 
lars, while  the  decline  in  the  deposits  in  State  and  savings 
banks  was  no  less  surprising.  By  June,  banks  all  over  the 
country  were  being  forced  to  the  wall.  In  July,  seventy- 
three  national  banks  failed  as  compared  with  twenty-five 
in  the  previous  month,  while  the  State  and  private  bank- 
ing-houses showed  a  mortality  equally  alarming.  By 
August  1st  a  panic  of  great  severity  was  raging  through- 
out the  country,  and  particularly  in  the  great  metropoli- 
tan centres. 

The  only  avenue  of  relief  provided  by  the  laws  was  the 
issue  of  additional  national  bank-notes,  but  to  those  fa- 
miliar with  the  history  of  the  past,  it  was  apparent  that 
the  national  banks  were  bound  hand  and  foot  by  indis- 
creet legislation,  and  were  therefore  unequal  to  the  task 
of  extending  the  reHef  so  much  needed,  and  which,  under 
more  favorable  laws,  might  easily  have  been  supplied. 
The  situation  was  aggravated  in  no  small  degree  in  the 
reserve  and  central  reserve  cities  by  the  urgent  demands 
made  for  their  reserves  by  the  banks  in  the  interior.  So 
excessive  was  the  drain  upon  the  resources  of  the  banks 
in  some  cities,  that  in  many  cases  they  positively  refused 
to  respond  to  the  calls  of  the  banks  for  their  reserves,  un- 
less such  call  was  accompanied  by  the  assurance  that  such 
assistance  was  an  urgent  necessity.  Such  action  was 
prompted  by  the  fact  that  in  many  previous  instances 
packages  had  been  returned  unbroken  after  the  subsi- 
dence of  a  panic,  showing  that  the  contained  amounts 


104  CLEARING-HOUSES 

had  been  withdrawn  through  fear  of  loss,  rather  than 
through  the  necessity  of  replenishing  reserves. 

In  the  absence  of  any  legal  expedient  by  which  the 
country  could  escape  from  the  unprecedented  condition 
into  which  it  had  fallen,  it  was  left  to  the  financiers  in  the 
great  cities  and  to  the  great  corporations  accustomed  to 
wrestle  with  panics  in  times  past,  to  work  out  the  people's 
salvation.  The  remedy  that  was  applied  affords  one  of  the 
finest  examples  the  country  has  ever  seen  of  the  abiHty 
of  the  people  when  left  to  themselves  to  devise  impromptu 
measures  for  their  own  relief.  The  most  potent  factors  in 
staying  the  force  of  the  panic  were  the  clearing-house 
loan  certificates  issued  by  the  clearing-house  associations 
throughout  the  country. 

At  New  York  authority  was  duly  given,  by  resolution 
of  the  association,  for  the  appointment  of  a  loan  commit- 
tee for  the  issue  of  such  certificates  upon  the  hypotheca- 
tion of  acceptable  collaterals.  Immediately  upon  their 
appointment,  the  committee  proceeded  to  issue  to  apply- 
ing banks  loan  certificates,  upon  the  deposit  of  proper 
securities. 

The  issue  was  commenced  June  21,  1893,  and  ceased 
September  6th  of  the  same  year,  the  total  issue  having 
been  forty-one  million  four  hundred  and  ninety  thou- 
sand dollars.  The  largest  amount  outstanding  at  one 
time  (thirty-eight  million  two  hundred  and  eighty  thou- 
sand dollars)  was  attained  August  20th,  which  amount 
remained  unaltered  until  September  6th.  The  last  of  the 
certificates  was  retired  November  ist,  more  than  four 
months  from  the  date  of  first  issue.  These  certificates 
bore  interest  at  six  per  cent.,  and  were  secured  by  the 


o 
o 

2 
o 

CO 
00 

«. 

00 

:d 
o 

x^ 
o 

o 

O 
00 

o 

Q> 
0> 


Committee. 


o 
o 


s 


3 
O 
Si 


•SHv/noa  ONVsnoHi  3Aid 


lo6  CLEARING-HOUSES 

same  kind  of  collateral  as  in  1873,  1884,  and  1890.  The 
aggregate  amount  was  far  in  excess  of  any  previous  is- 
sue. The  next  largest  amount  was  in  1873,  the  aggre- 
gate, it  will  be  remembered,  having  been  less  than  twenty- 
seven  million  dollars.  Beginning  with  i860,  the  issues 
of  clearing-house  loan  certificates  at  New  York,  alone, 
have  amounted  to  the  enormous  aggregate  of  one  hun- 
dred and  sixty-eight  million  seven  hundred  and  seventy- 
four  thousand  dollars,  all  of  which  have  been  redeemed 
without  the  loss  of  a  single  dollar,  and  in  periods  ranging 
from  three  to  seven  months  from  the  date  of  first  issue. 

The  Boston  Clearing-house  Association,  by  resolu- 
tion, authorized  a  similar  course,  and  on  June  27th  the 
committee  began  the  issue  of  certificates  in  denomina- 
tions of  ten  thousand  dollars  and  five  thousand  dollars, 
respectively,  bearing  interest  at  y.}^  per  cent.,  the  same 
rates  as  in  1873  and  1890. 

From  August  23d  to  September  ist  the  amount  was 
at  its  maximum — eleven  million  four  hundred  and  forty- 
five  thousand  dollars.  The  aggregate  issue  was  eleven 
million  six  hundred  and  forty-five  thousand  dollars, 
which,  it  will  be  observed,  is  somewhat  in  excess  of  one- 
quarter  of  the  amount  taken  out  at  New  York.  From 
June  27th,  when  the  first  issue  was  made,  to  the  end  of 
the  period,  balances  were  paid  at  the  clearing-house  with 
certificates  to  the  extent  of  forty-three  million  one  hun- 
dred and  thirty  thousand  dollars,  which  was  38.4  per 
cent,  of  the  total  balances  at  the  clearing-house  during 
the  time  the  certificates  were  used.  By  far  the  largest 
amount  of  certificates  was  employed  in  September,  and 
so  far  as  single  days  are  concerned,  the  maximum  was 


Io8  CLEARING-HOUSES 

reached  September  7th  and  9th,  the  amount  on  each  of 
these  days  having  been  one  million  and  sixty-five  thou- 
sand dollars.  By  October  21st  the  certificates  had  all 
been  retired  and  cancelled. 

In  pursuance  of  a  resolution  of  the  association  at  Phil- 
adelphia, a  loan  committee  v^as  appointed,  which  issued 
certificates  in  denominations  of  five  thousand  dollars  only, 
bearing  interest  at  six  per  cent.,  as  in  1873  and  1890. 

The  total  amount  of  the  issue  was  eleven  million  four 
hundred  and  seventy  thousand  dollars,  being  less  by  only 
a  small  amount  than  the  total  issue  at  Boston.  The  larg- 
est amount  outstanding  at  any  one  time  was  ten  million 
nine  hundred  and  sixty-five  thousand  dollars,  on  August 
15th,  all  of  which  was  redeemed  in  due  time  without  loss 
to  any  of  the  members. 

At  Baltimore  certificates  in  denominations  of  one  thou- 
sand dollars,  three  thousand  dollars,  and  six  thousand 
dollars  were  issued,  bearing  interest  at  six  per  cent.  From 
August  24th  to  September  6th  the  certificates  outstand- 
ing were  at  their  maximum  of  one  million  four  hundred 
and  seventy-five  thousand  dollars,  all  of  which  were  ulti- 
mately retired  and  cancelled. 

The  Clearing-house  Association  at  New  Orleans  fol- 
lowed the  action  at  New  York  as  closely  as  possible.  On 
June  22d  a  resolution  was  unanimously  adopted  as  fol- 
lows: 

"  Resolved,  That  a  committee  of  six  banks  be  appointed 
by  the  chair  to  receive  from  banks,  members  of  the  asso- 
ciation, bills  receivable  and  other  securities  to  be  ap- 
proved by  said  committee,  who  shall  be  authorized  to 
issue  therefor  to  such  depositing  banks  loan  certificates 


U 


O 


I  lo  CLEARING-HOUSES 

bearing  interest  at  seven  per  cent,  per  annum,  and  such 
loan  certificates  shall  not  be  in  excess  of  seventy-five  per 
cent,  of  the  market  value  of  the  securities  or  bills  receiv- 
able so  deposited,  the  committee  reserving  the  right  to 
call  for  additional  security  as  in  their  judgment  the  same 
is  required;  and  such  certificates  shall  be  received  and 
paid  in  settlement  of  balances  resulting  from  the  ex- 
changes at  the  clearing-house,  and  all  the  rules  and  reg- 
ulations heretofore  adopted  in  the  issue  of  such  cer- 
tificates shall  be  in  force  in  the  present  issue.  It  is 
expressly  agreed  and  understood  that  no  bank  which  shall 
have  received  certificates  shall  make  any  new  loans  or  dis- 
counts, but  shall  confine  its  business  to  the  collection  of 
outstanding  loans,  until  all  clearing-house  certificates 
shall  have  been  retired." 

Certificates  were  accordingly  issued  in  denominations 
of  five  hundred  dollars  to  ten  thousand  dollars.  On  the 
day  of  the  passage  of  the  above  resolution  it  was  also 

"  Resolved,  That  any  members  of  this  association  now 
out  of  line  in  their  reserve  shall  immediately  take  steps  to 
put  themselves  in  line,  and  that  any  members  desiring 
to  avail  themselves  of  the  use  of  clearing-house  certifi- 
cates shall  not  be  allowed  to  increase  their  line  of  dis- 
counts." 

Also  on  June  22d  the  committee  addressed  to  the  cash- 
iers of  the  several  associated  banks  the  following  com- 
munication : 

"  The  undersigned  beg  leave  to  advise  you  that  they 
have  accepted  the  appointment  extended  to  them  by  the 
meeting  of  the  associated  banks,  held  at  the  clearing- 
house this  day,  to  act  as  a  loan  committee,  and  that  as 


CLEARING-HOUSE   LOAN    CERTIFICATES  m 

such  committee  they  will  meet  daily  at  the  clearing-house 
at  II  o'clock  A.M.  on  and  after  Thursday,  the  22d  inst., 
prepared  to  issue  loan  certificates  in  accordance  with  the 
action  adopted  by  the  meeting  referred  to.  Banks  desir- 
ing to  receive  loan  certificates  on  pledge  of  bills  receivable 
or  other  securities  to  be  deposited  with  the  committee, 
are  requested  to  make  application  for  such  certificates 
at  or  before  1 1  o'clock  a.m.  in  the  form  herewith  enclosed, 
to  the  chairman  of  the  committee  at  the  clearing-house, 
with  a  certified  copy  of  a  resolution  of  their  board  of 
directors,  in  the  form  enclosed,  authorizing  the  deposit 
and  pledge  of  securities  for  loan  certificates.  You  are 
requested  to  report  daily  to  the  manager  of  the  clearing- 
house each  morning  at  ten  o'clock  the  amount  of  certifi- 
cates held  by  your  bank." 

One  striking  feature  of  the  above  communication 
which  does  not  appear  in  the  resolutions  and  communi- 
cations in  other  similar  associations,  is  that  banks  are  re- 
ferred to  as  acting  in  a  joint  capacity  instead  of  as  in- 
dividuals. Soon  after  the  above  action  was  taken,  a 
resolution  was  passed  by  the  boards  of  directors  of  the 
several  associated  banks  as  follows : 

"  Resolved,  That  the  president  or  cashier  be  and  is 
hereby  authorized  and  empowered  to  deposit,  pledge,  or 
hypothecate  with  the  loan  committee  of  the  associated 
banks  of  New  Orleans,  United  States  stocks,  bills  re- 
ceivable, or  other  securities  belonging  to  this  bank  as 
collateral  security  for  any  loan  or  loans  made  to  the  said 
bank  by  that  committee.'* 

Applications  to  the  loan  committee  for  certificates 
were  made  by  members  in  form  as  follows : 


1 1 2  CLEARING-HOUSES 

"  The applies  for  the  issue  to  them  of  loan  cer- 
tificates to  the  amount  of  $ to  be  secured  by  the 

deposit  of  collateral  security  as  per  security  herewith 
sent." 

Before  taking  out  loan  certificates  the  several  members 
ratified  the  action  of  the  association  in  authorizing  their 
issue,  in  the  following  manner : 

"  Resolved,  That  as  a  member  of  the  New  Orleans 
Clearing-house  Association,  the  action  of  said  associa- 
tion in  the  matter  of  issuing  clearing-house  certificates 
is  hereby  ratified  and  confirmed,  with  all  of  its  provisions." 

To  intrench  themselves  against  loss  in  the  event  of 
failure  on  the  part  of  any  member  of  the  association  tak- 
ing out  loan  certificates  to  redeem  the  same  with  the 
stipulated  interest,  each  member  was  required  to  execute 
and  deliver  an  obligation,  of  which  the  following  is  a 
copy: 

**  This  certifies,  That  the  National  Bank  of  the 

City  of  New  Orleans  is  indebted  to  the  New  Orleans 

Clearing-house  Association  in  the  sum  of dollars, 

paid  by  said  association  to  said  bank  on  the  faith  hereof, 
and  in  consideration  thereof  said  bank  hereby  agrees  to 
pay  said  sum  with  interest  from  the  date  thereof,  at  the 
rate  of  seven  per  cent,  per  annum  to  the  said  association 
or  to  its  assigns,  and  said  association  is  hereby  authorized 
through  its  loan  committee  or  otherwise,  to  sell  at  public 
auction  or  private  sale,  on  three  days'  notice  to  said 
bank,  the  securities  deposited  by  said  bank  with  such  as- 
sociation, in  accordance  with  the  resolution  of  such  asso- 
ciation, in  pursuance  of  which  this  certificate  is  issued." 

As  a  further  measure  of  protection  to  the  members  in 


u 


114 


CLEARING-HOUSES 


the  event  of  any  emergency  arising,  not  otherwise  pro- 
vided for,  it  was  further 

"  Resolved,  That  any  loss  arising  from  the  issue  of 
loan  certificates  shall  be  borne  by  the  banks  comprising 
the  Clearing-house  Association,  pro  rata  of  capital  and 
surplus;  and  this  resolution  shall  be  ratified  by  the  boards 
of  the  respective  banks,  members  of  the  association,  and 
a  certified  copy  of  such  consent  delivered  to  the  chair- 
man of  the  loan  committee." 

In  addition  to  this,  a  resolution  was  passed,  limiting  the 
amount  of  payment  by  any  member  of  the  clearing-house 
association  to  a  single  person  in  any  one  day  to  one 
hundred  dollars.  The  largest  amount  of  certificates  out- 
standing at  any  one  time  was  nine  hundred  and  ninety- 
eight  thousand  dollars,  covering  one  week  from  Septem- 
ber 7th  to  September  14th,  all  of  which  were  finally 
retired  without  loss  to  any  member. 

The  Cincinnati  Clearing-house  likewise  issued  loan 
certificates  in  1893,  and  the  form  employed  at  that  time 
is  given  among  the  illustrations. 

All  of  the  associated  banks  at  Buffalo  took  out  certifi- 
cates in  1893  in  denominations  of  five  thousand  dollars 
and  one  thousand  dollars,  bearing  interest  at  six  to  eight 
per  cent.,  but  they  did  not  all  use  them.  The  form  em- 
ployed was  substantially  the  same  as  that  used  at  previous 
dates  in  New  York.  The  sum  total  of  the  issue  was  nine 
hundred  and  eighty-five  thousand  dollars,  with  which 
balances  were  settled  to  the  amount  of  two  million  seven 
hundred  and  eighty  thousand  dollars.  In  July,  forty  per 
cent,  of  the  balances  were  paid  with  these  certificates,  and 
fifty  per  cent,  in  August.     From  July  9th  the  amount 


^etsE  uBf^^ 


P/^ 


sxrvrraa  tixvx^ioaE  aua> 


Il6  CLEARING-HOUSES 

outstanding  reached  its  maximum,  nine  hundred  and 
twenty-five  thousand  dollars. 

Only  ten  out  of  nineteen  members  of  the  Clearing- 
house Association  at  Pittsburg  took  out  loan  certificates 
in  1893.  The  total  amount  issued  was  nine  hundred  and 
eighty-seven  thousand  dollars,  being  only  two  thousand 
dollars  more  than  the  issue  at  Buffalo.  The  first  were 
taken  out  August  nth,  and  the  last  were  retired  No- 
vember loth,  the  full  amount  of  the  issue  having  been 
outstanding  on  September  15th.  The  certificates  bore 
interest  at  six  per  cent. 

A  loan  committee  was  appointed  by  the  chairman  of 
the  Clearing-house  Association  of  Detroit,  upon  vote  of 
the  association  authorizing  such  action,  and  certificates 
bearing  interest  at  seven  per  cent,  were  issued  to  members 
applying  for  the  same,  in  denominations  of  one  thousand 
dollars.  A  sample  of  the  certificate  employed  is  presented 
in  reduced  fac-simile  among  the  illustrations.  The 
amount  attained  a  maximum  of  three  hundred  and  sixty 
thousand  dollars  on  September  i  ith.  In  Section  8  of  the 
constitution,  provision  in  case  of  loss  resulting  from  de- 
fault in  payment  by  a  member  of  the  obligation  executed 
and  delivered  upon  receipt  of  loan  certificates  and  from 
failure  to  realize  a  sufficient  amount  from  the  securities 
held  as  collateral  to  the  obligation,  is  made  as  follows: 
'*  Fifty  per  cent,  of  the  loss  shall  be  pro-rated  among  the 
members  on  the  amount  of  the  capital  stock,  and  the 
residue  of  the  balance  of  loss  shall  be  assessed  pro  rata 
the  aggregate  amount  which  the  several  members  have 
sent  to  the  clearing-house  during  the  time  any  of  such 
certificates  of  deposit  may  have  been  outstanding." 


CLEARING-HOUSE   LOAN    CERTIFICATES  117 

The  Atlanta  Clearing-House  Association  passed  a  reso- 
lution, August  II,  1893,  referring  the  matter  of  issuing 
clearing-house  loan  certificates  to  a  special  committee, 
and  on  August  15th  a  communication  from  the  Chamber 
of  Commerce  was  entertained,  requesting  the  issuance 
of  clearing-house  loan  certificates,  whereupon  a  com- 
mittee of  three  was  appointed  to  act  as  trustees  for  the 
receipt  of  collateral  securities,  and  for  the  issuance  of 
such  certificates  to  the  extent  of  sixty-six  and  two-thirds 
per  cent,  of  the  collateral  deposited. 

On  August  17th  a  new  manager  was  appointed,  who, 
under  direction  of  the  trustees,  took  active  charge  of  is- 
suing the  certificates.  The  largest  amount  out  at  any  one 
time  was  one  hundred  and  twenty-seven  thousand  dollars. 
All  were  redeemed  by  November  ist,  save  about  twenty 
dollars,  which  at  last  accounts  were  still  outstanding. 
The  denominations  were  five  dollars,  ten  dollars,  one 
hundred  dollars,  and  five  hundred  dollars.  A  sample  of 
the  largest  denomination  is  presented  on  another  page. 

Two  things  are  characteristic  of  the  Atlanta  certificates 
which  are  not  to  be  found  in  any  of  those  heretofore  dis- 
cussed. In  the  first  place  they  were  issued  to  the  extent 
of  only  sixty-six  and  two-thirds  per  cent,  of  the  collateral 
deposited  as  compared  with  a  minimum  of  seventy-five 
per  cent,  in  the  other  associations;  and  in  the  second  place 
it  is  to  be  noted  on  the  certificates  that  they  "  will  be  re- 
ceived on  deposit  or  in  payment  of  debts  due  any  bank  in 
said  clearing-house  " — an  implication  that  they  were 
used  for  general  circulation,  which,  indeed,  is  true. 

In  June,  1893,  the  Clearing-house  Association  at  Bir- 
mingham, Ala.,  appointed  a  committee  to  inquire  into  the 


1 1 8  CLEARING-HOUSES 

best  methods  for  relieving  the  situation,  which  was  ag- 
gravated by  a  run  on  one  of  its  members  about  a  month 
previous  to  that  time,  and  the  committee  recommended 
the  use  of  clearing-house  loan  certificates.  In  addition  to 
this,  the  association  passed  resolutions  similar  to  the  one 
passed  at  New  Orleans,  limiting  the  amount  of  actual 
cash  each  member  should  pay  to  a  customer  on  any  one 
day  to  one  hundred  dollars,  which  was  afterward  reduced 
to  fifty  dollars,  and  providing  a  penalty  for  violation.  The 
denominations  of  loan  certificates  first  used  were  one 
thousand  dollars,  five  hundred  dollars,  one  hundred 
dollars,  fifty  dollars,  ten  dollars,  and  five  dollars,  re- 
spectively. 

Like  the  certificates  in  Atlanta,  they  were  intended 
for  general  circulation  among  the  customers  of  the  banks, 
but  unHke  any  certificates  previously  mentioned,  they 
'were  issued  to  the  extent  of  only  fifty  per  cent,  of  the 
collateral  required.  Customers  at  first  received  them 
with  much  reluctance,  but  they  soon  found  that  the  mer- 
chants would  take  them  for  debts  and  for  merchandise, 
that  the  banks  would  take  them  on  deposit  and  accept 
them  in  payment  of  notes.  To  obtain  cash,  persons  com- 
menced to  buy  small  bills  of  goods  with  them,  expecting 
to  receive  money  in  change.  This  checkmated  the  mer- 
chants, and  they  called  on  the  association  for  smaller  de- 
nominations. Hence  certificates  of  two  dollars,  one  dol- 
lar, fifty  cents,  and  twenty-five  cents  were  subsequently 
issued.  No  other  association  in  the  United  States  com- 
pares with  the  one  at  Birmingham  in  the  comprehensive- 
ness of  its  currency  system  and  in  the  extent  to  which 
it  was  projected  on  this  occasion.    A  fac-simile  of  one  of 


I 


gguuuutKJtTOtJrnr^uuurn::^^ 


3 

o 

x: 

I 

C 


§§i::iax:iaiaaaaiaaai;;u^^ 


1 20  CLEARING-HOUSES 

the  smaller  certificates  is  presented  among  the  illustra- 
tions. 

On  August  22,  1893,  the  following  resolution  was 
adopted  by  the  Clearing-house  Association  at  Richmond, 
Va.  : 

"  Resolved,  That  the  committee  have  certificates  pre- 
pared in  denominations  of  one  dollar,  five  dollars,  and 
ten  dollars,  in  handsome  form,  ready  for  use  at  such  time 
as  this  association  may  hereafter  determine,  said  certifi- 
cates to  be  payable  on  demand  after  ninety  days  through 
the  clearing-house,  to  bear  three  per  cent,  interest  per 
annum,  and  to  be  secured  by  deposits  of  collateral  as  by 
former  resolution,  interest  to  cease  after  ninety  days." 
The  certificates  were  duly  prepared  in  compliance  with 
the  authority  thus  given,  but  were  never  used. 

The  Clearing-house  Association  at  Chattanooga, 
Tenn.,  resorted  to  loan  certificates  in  1893,  the  only  time 
in  the  history  of  that  organization  that  it  has  done  so. 

Besides  the  loan  certificates  issued  in  1893,  there  was  a 
considerable  amount  of  emergency  circulation  taken  out 
by  the  banks  in  the  Southeast,  under  the  title  of  "  Clear- 
ing-house certificates,"  in  cities  where  no  clearing- 
houses existed.  In  adopting  the  name  of  clearing-house 
certificates,  it  was  not  the  purpose  of  the  banks  to  prac- 
tise deception  on  the  people,  but  to  indicate  what  was 
really  true  and  what  the  term  would  seem  to  imply, 
namely,  that  such  certificates  were  temporary  loans  made 
by  the  banks  associated  together,  and  that  the  banks  were 
pledged  for  their  redemption.  The  denominations  in  the 
cities  referred  to  were :  Albany,  Ga.,  ten  dollars,  five  dol- 
lars, and  one  dollar;   Chester,  S.  C,  ten  dollars,  five  dol- 


O       CO     ^ 
10        ^     CO 


BJ 
1/ 


I- 

DJ 
U 

lU 

o 


E 


CD      0 


Eoc- 
E<.£ 

O 

CliJ 


b£ 


=  O 

-t-J  T"   ^ 


^co 

i° 

CO    Rj 

-o  >, 
-t-»    Co 

I- 

O    (0 

-M     O 

^& 

■M     O 


O 
CO    © 

a 


«c 


S^     O 


tf> 


10    ^    Brt) 


»••»•.•••••• 


3 
O 
I   © 

< 

E-^ 

JZ  c 

bfi 

c 


c^   © 
i-   © 

5  5  5 


QQ 


55g 
■J  .—  »^ 

©  ©  ^ 

■2        CO 

a  =  3: 

CO?    ^ 

©      E 

^  ti  c\S 

^§" 

col 

=  |l 
£fE 

o     5 


••••••••••••••••••••••••••••< 


1 22  CLEARING-HOUSES 

lars,  and  one  dollar;  Columbia,  S.  C,  fifty  dollars,  twenty 
dollars,  ten  dollars,  five  dollars,  two  dollars,  and  one  dol- 
lar; Danville,  Va.,  one  hundred  dollars,  fifty  dollars, 
twenty  dollars,  ten  dollars,  five  dollars,  two  dollars,  and 
one  dollar;  Newman,  Ga.,  ten  dollars,  five  dollars,  and  one 
dollar;  and  Rock  Hill,  S.  C,  five  dollars,  two  dollars,  and 
one  dollar.  There  is  no  doubt  that  the  relief  afforded  in 
this  manner  was  of  great  public  assistance  in  the  several 
communities  where  it  was  given,  effecting  results  similar 
to  those  accomplished  by  the  actual  clearing-house  loan 
certificates  in  the  great  centres. 

In  1895  came  another  period  of  depression,  especially 
in  certain  localities,  but  by  no  means  so  disastrous  nor  so 
permanent  as  the  panic  of  1893.  Such  was  the  pressure 
at  Boston,  however,  that  the  clearing-house  association 
authorized  the  issue  of  loan  certificates,  which  were  taken 
out  to  the  extent  of  two  hundred  and  thirty-five  thousand 
dollars,  the  last  of  which  were  retired  March  12,  1896. 
In  like  manner,  at  Philadelphia  an  issue  was  made  aggre- 
gating eight  million  two  hundred  and  twenty  thousand 
dollars. 

In  1896,  at  New  Orleans,  alone,  clearing-house  loan 
certificates  were  issued,  this  having  been  the  eleventh 
time  that  resort  to  such  measures  had  been  made  since 
the  history  of  clearing-houses  in  this  country  began,  less 
than  a  half  century  ago.  The  largest  amount  of  certifi- 
cates outstanding  at  one  time  was  three  hundred  and 
ninety-nine  thousand  dollars,  and  was  attained  on  Sep- 
tember 4th.  The  last  of  the  certificates  were  retired  and 
cancelled  November  17th.  The  occasion  for  the  issue  at 
this  time  was,  no  doubt,  the  disturbance  in  business  cir- 


CLEARING-HOUSE   LOAN    CERTIFICATES  123 

cles  arising  from  the  presidential  contest,  which,  always 
a  disturbing  factor,  was  in  this  year  unusually  exciting. 
Thus  the  New  Orleans  Clearing-house  Association  en- 
joys the  unique  distinction  of  having  on  two  occasions — 
1879  and  1896 — been  the  only  association  to  issue  loan 
certificates. 

The  method  of  calculating  interest  on  certificates  has 
been  in  many  associations  a  source  of  much  dif^culty. 
In  some  instances  the  clearing-houses  have  taken  no  cog- 
nizance of  the  interest  whatsoever,  but  left  the  members 
free  to  adjust  it  for  themselves.  It  is  clear  that  the  inter- 
est, like  the  balances,  must  consist  of  credits  and  debits 
w^hich  exactly  equal  or  offset  each  other.  That  is  to  say, 
the  interest  charged  against  certain  members  for  the  cer- 
tificates taken  out  by  them  must  exactly  equal  the  inter- 
est paid  to  the  members  holding  the  certificates.  It  was 
not  a  difficult  matter  to  keep  a  proper  record  of  the  in- 
terest to  be  charged  against  the  members,  for  the  clear- 
ing-house committee  knew  to  whom  and  in  what  amounts 
they  had  issued  certificates,  and  it  was  necessary  only  to 
calculate  the  interest  at  the  stipulated  rate  on  the  full 
amount  of  the  certificates  issued  to  the  several  members 
for  the  time  they  were  outstanding,  and  to  place  the  same 
to  their  debit;  but  to  know  what  members  held  certifi- 
cates issued  to  other  banks  and  in  what  amounts  after  the 
settlement  of  balances  therewith  began,  was  to  many  a 
source  of  confusion. 

The  New  York  plan  has  been  perhaps  the  most  com- 
plete and  satisfactory,  and  was  followed  by  many  of  the 
associations.  Each  member  was  required  to  send  to  the 
clearing-house  each  morning  a  statement  of  the  amount 


k 


124 


CLEARING-HOUSES 


of  certificates  on  hand.  In  a  book  kept  for  the  purpose 
these  amounts  were  entered  to  the  credit  of  the  banks, 
each  account  being  kept  on  a  separate  page.  At  the  end 
of  the  month  footings  were  made  of  the  certificates  held 
by  each  bank  for  that  time,  and  the  total  divided  by  the 
number  of  days  the  certificates  were  outstanding.  This 
gave  the  average  amount  of  certificates  on  hand  for  the 
given  time,  and  upon  this  amount  interest  was  calculated 
at  the  rate  agreed  upon  and  placed  to  the  credit  of  the 
bank.  Drafts  were  then  drawn  upon  the  banks  to  whom 
certificates  had  been  issued  for  the  interest  due  by  them. 
In  turn  checks  were  sent  to  the  banks  holding  certifi- 
cates for  the  interest  due  to  them. 

The  same  plan  was  followed  at  Philadelphia,  but  at 
Boston  each  member  calculated  daily  the  interest  due 
on  the  certificates  held,  and  sent  to  the  clearing-house 
with  the  certificates  to  be  used  in  settlement  of  balances 
a  ticket  containing  a  statement  of  the  interest  due  for 
the  time  the  certificates  were  held. 

At  Bufifalo  the  interest  was  calculated  daily  and  settled 
weekly  by  draft  of  the  manager  on  debtor  banks  in 
favor  of  creditor  banks.  At  Louisville,  Ky.,  the  interest 
on  the  certificates  taken  out  in  1891  was  calculated  by  the 
bank,  the  clearing-house  taking  no  cognizance  thereof 
whatsoever.  The  rate  was  fixed  at  nine  per  cent,  for  two 
days — virtually  eighteen  per  cent. — and  was  placed  at 
such  an  exorbitant  figure  to  prevent  the  banks  which 
took  advantage  of  such  certificates  from  expanding  their 
loans  at  a  higher  rate  of  interest  than  they  were  paying 
on  their  loan  certificates. 

In  all  such  cases  the  question  might  arise  as  to  th( 


CLEARING-HOUSE   LOAN    CERTIFICATES  125 

disposition  of  the  interest  charged  against  members  on 
certificates  taken  out  but  never  used.  It  is  only  necessary 
to  say  in  reply  that  it  was  the  common  practice  to  charge 
each  bank  with  the  full  amount  of  certificates  taken  out 
and  to  credit  said  bank  with  the  full  amount  of  certificates 
held  to  whomsoever  they  might  have  been  issued.  ^  The 
credit  and  debit  interest,  therefore,  on  certificates  issued 
to  any  member,  but  never  used,  would  exactly  balance. 

Owing  to  a  popular  misconception  of  the  character  and 
purpose  of  clearing-house  loan  certificates,  much  adverse 
criticism  regarding  them  has  been  indulged  in,  espe- 
cially in  1893,  on  the  ground  that  such  issues  were  made 
in  violation  of  the  ten  per  cent,  prohibitive  tax  on  bank- 
note currency  other  than  national  bank-note  circulation. 
Such  objection  was  based  on  the  assumption  that  clear- 
ing-house loan  certificates  were  a  form  of  national  bank 
currency — an  assumption  which  is  ill  founded,  both  in 
theory  and  in  fact.  The  certificates  were  essentially  tem- 
porary loans  made  by  the  banks  banded  together  as  a 
clearing-house  association  to  the  members  of  such  asso- 
ciation, and  were  available  to  such  banks  only  for  the 
purpose  of  settling  balances  due  from  and  to  each  other. 
In  the  words  of  the  Comptroller  of  the  Currency,  they 
were  but  due  bills,  and  their  sole  function  consisted  in  dis- 
charging the  single  obligation  at  the  clearing-house.  An  , 
attempt  on  the  part  of  a  bank  in  any  of  the  associations 
issuing  these  certificates  to  use  them  otherwise  would 
have  incurred  a  fine  and  other  penalties  provided  in  the 
rule  governing  such  association.  In  no  instance,  except- 
ing those  mentioned  in  the  South,  were  they  designated 
to  serve  as  money,  and  nowhere  else  did  they  circulate  as 


126 


CLEARING-HOUSES 


money.  Hence  the  courts  of  Pennsylvania  decided  that 
they  should  not  be  regarded  as  money.  The  imposi- 
tion of  a  tax  upon  them,  therefore,  would  have  been  not 
only  a  serious  blow  to  one  of  the  most  effective  and  in- 
genious contrivances  for  the  deliverance  of  the  country 
from  the  throes  of  panic  that  has  yet  been  devised,  but 
would  also  have  been  a  direct  violation  of  the  spirit  of 
the  law. 


CHAPTER   XI 

THE   NEW   YORK   CLEARING-HOUSE 

Origin  and  Early  History — Formal  Organization  in  1853 — First 
Location — New  York  Clearing-house  Building  Company— 
Cedar  Street  Property — Constitutional  Provisions— Com- 
mittees— Statistics  of  Membership— Clearing  for  Non-mem- 
bers—Statements  of  Condition— Capitalization  of  New  York 
Banks — Records  of  Clearing-house. 

Notwithstanding  the  magnitude  of  the  transactions 
at  the  New  York  Clearing-house,  and  the  important  part 
that  it  plays  in  banking  economy,  very  little  is  known 
about  it  outside  of  banking  circles.  The  business  com- 
munity is  not  familiar  with  its  functions,  and  the  public 
in  general  knows  very  little  of  its  operations.  While  the 
exchanges  are  enormous,  the  method  is  simple  and  easy 
to  comprehend.  It  is  the  purpose  of  this  chapter,  there- 
fore, to  inquire  into  its  origin  and  trace  its  growth  and 
constitutional  development.  To  the  end  that  the  reader 
may  be  the  more  fully  prepared  to  comprehend  its  true 
significance,  it  is  necessary,  by  way  of  introduction,  to 
pass  in  review  the  methods  of  exchange  employed  by 
the  New  York  banks  prior  to  its  establishment. 
J\  During  a  comparatively  short  period  immediately  fol- 
lowing 1849  the  number  of  banks  in  New  York  in- 
creased from  twenty-four  to  sixty.  In  the  daily  course 
of  business  each  bank  received  checks  and  other  items 

127 


128  CLEARING-HOUSES 

on  each  of  the  other  banks,  which  had  to  be  presented  for 
collection.  All  such  items  on  hand  were  assorted  and 
listed  on  separate  slips  at  the  close  of  the  day,  and  items 
coming  in  through  the  mail  on  the  following  morning 
were  added  at  that  time.  To  make  the  daily  exchanges 
each  bank  sent  out  a  porter  with  a  book  of  entry,  or  pass- 
book, together  with  the  items  to  be  exchanged. 

The  receiving  teller  of  the  first  bank  visited  entered 
the  exchanges  brought  by  the  porter  -on  the  credit  side 
of  his  book  and  the  return  exchanges  on  the  debit  side, 
who  then  hurried  away  to  deliver  and  receive  in  like 
manner  at  the  other  banks.  It  often  happened  that 
five  or  six  porters  would  meet  at  the  same  bank,  thereby 
retarding  each  other's  progress  and  causing  much  de- 
lay. Considerable  time  was  consumed  in  making  the 
circuit.  Hence  the  entry  of  the  return  items  in  the 
books  of  the  several  banks  was  delayed  until  the  after- 
noon, at  an  hour  when  the  other  work  of  the  bank  was 
becoming  urgent. 

A  daily  settlement  of  the  balances  was  not  attempted 
by  the  banks,  owing  to  the  time  it  would  have  required, 
but  they  informally  agreed  upon  a  weekly  adjustment, 
the  same  to  take  place  after  the  exchanges  on  Friday 
morning.  At  that  time  the  cashier  of  each  bank  drew 
a  check  for  each  of  the  several  balances  due  it,  and  sent 
a  porter  out  to  collect  them.  At  the  same  time  the  por- 
ter carried  coin  with  which  to  pay  balances  due  by  his 
bank.  After  the  settlement  had  been  made,  there  was 
a  meeting  to  adjust  differences  and  bring  order  out  of 
chaos. 

An  old  bank  of^cer  (J.  S.  Gibbons),  in  describing  the 


I 


THE   NEW    YORK   CLEARING-HOUSE  129 

inconveniences  and  defects  of  this  system,  says  that 
some  of  the  more  speculative  banks  took  advantage  of 
the  weekly  method  of  settlements  by  carrying  a  line  of 
discounts  to  an  amount  greater  than  their  legitimate 
resources  would  allow.  Thus  a  bank  would  manage  to 
carry  a  small  debit  balance  of  two  or  three  thousand 
dollars  with  thirty  or  more  institutions,  making  a  total 
debit  balance  of,  say,  one  hundred  thousand  dollars  on 
which  it  discounted  paper.  It  was  the  practice  to  bor- 
row enough  on  Thursday  to  make  the  settlements  on 
Friday,  and  the  return  of  the  loan  on  Saturday  threw  it 
again  into  the  debtor  column.  Virtually,  therefore,  the 
weekly  settlements  were  nominal  only,  and  to  show  that 
there  was  no  attempt  at  economy  of  time  and  labor  in 
making  them,  it  is  only  necessary  to  say  that  the  cashier 
drew  a  check  for  every  balance  due  him,  whereas  a  draft 
on  one  bank  in  favor  of  another  might  have  settled  two 
accounts  at  once.  ^ 

The  banks  were  at  liberty  to  draw  on  each  other  for 
their  credit  balances  without  waiting  for  the  settlements 
on  Friday,  and  hence,  when  specie  was  needed,  this  was 
not  infrequently  done.  But  so  far  did  many  of  the 
banks  extend  their  loans  and  discounts  that  a  single 
small  draft  by  one  bank  on  another  would  induce  a  gen- 
eral drawing  and  involve  them  all  in  confusion  and 
virtual  war  on  each  other.  Three  o'clock  would  arrive, 
with  the  line  of  drafts  incomplete,  thus  enabling  debtor 
banks  ofttimes  to  add  fifty  thousand  dollars  to  their 
specie,  whereas  creditor  banks  would  find  themselves  at 
the  close  of  the  day  depleted  in  perhaps  twice  that  sum. 

The  desirability  of  a  substitute  for  such  a  system  had 


I30  CLEARING-HOUSES 

long  been  realized,  but  as  yet  no  plausible  scheme  had 
been  proposed.  As  early  as  1831  a  plan  had  been  sug- 
gested by  Albert  Gallatin,  which,  to  a  very  remarkable 
degree,  coincided  with  the  one  ultimately  adopted.  His 
proposition  occurs  in  a  pamphlet  of  one  hundred  and 
twenty-four  pages,  entitled,  ''  Suggestions  on  the  Banks 
and  Currency  of  the  Several  United  States  in  Reference 
Principally  to  the  Suspension  of  Specie  Payments,"  and 
is  so  significant  that  we  quote  it  in  full : 

"  There  is  a  measure  which,  though  belonging  to  the 
administration  of  banks,  rather  than  to  legal  enact- 
ments, is  suggested  on  account  of  its  great  importance. 
Few  regulations  would  be  more  useful  in  preventing 
dangerous  expansions  of  discounts  and  issues  on  the  part 
of  the  city  banks,  than  a  regular  exchange  of  notes  and 
checks,  and  an  actual  daily  or  semi-weekly  payment  of 
the  balances.  It  must  be  recollected  that  it  is  by  this 
process  alone  that  a  bank  of  the  United  States  has  ever 
acted  or  been  supposed  to  act  as  a  regulator  of  the  cur- 
rency. Its  action  would  not  in  that  respect  be  wanted 
in  any  city,  the  banks  of  which  would,  by  adopting  the 
process,  regulate  themselves.  It  is  one  of  the  principal 
ingredients  of  the  system  of  the  banks  of  Scotland.  The 
bankers  of  London,  by  the  daily  exchange  of  drafts  at 
the  clearing-house,  reduce  the  ultimate  balance  to  a  very 
small  sum ;  and  that  balance  is  immediately  paid  in  notes 
of  the  Bank  of  England.  The  want  of  a  similar  arrange- 
ment among  the  banks  of  this  city  produces  relaxation, 
favors  improper  expansions,  and  is  attended  with  serious 
inconveniences.  The  principal  difficulty  in  the  way  of 
an  arrangement  for  that  purpose  is  the  want  of  a  com- 


THE   NEW   YORK   CLEARING-HOUSE  131 

mon  medium  other  than  specie  for  effecting  the  payment 
of  balances.  Those  are  daily  fluctuating;  and  a  per- 
petual drawing  and  re-drawing  of  specie  from  and  into 
the  banks  is  unpopular  and  inconvenient. 

"  In  order  to  remedy  this,  it  has  been  suggested  that 
a  general  cash  office  might  be  established,  in  which  each 
bank  should  place  a  sum  in  specie,  proportionate  to  its 
capital,  which  would  be  carried  to  its  credit  in  the  books 
of  the  office.  Each  bank  would  be  daily  debited  or 
credited  in  those  books  for  the  balance  of  its  account 
with  all  the  other  banks.  Each  bank  might  at  any  time 
draw  for  specie  on  the  office  for  the  excess  of  its  credit 
beyond  its  quota;  and  each  bank  should  be  obliged  to 
replenish  its  quota,  whenever  it  was  diminished  one- 
half,  or  in  any  other  proportion  agreed  on. 

"  It  may  be  that  some  similar  arrangement  might  be 
made  in  every  other  county,  or  larger  convenient  district 
of  the  State.  It  would  not  be  necessary  to  establish 
then  a  general  cash  office.  Each  of  the  banks  of  Scot- 
land has  an  agent  at  Edinburgh,  and  the  balances  are 
then  settled  twice  a  week,  and  paid  generally  by  drafts  on 
London.  In  the  same  manner  the  balances  due  by  the 
banks  in  each  district  might  be  paid  by  drafts  on  New 
York  or  any  other  place  agreed  on." 

These  extracts  contain  the  very  quintessence  of  the 
clearing-house  system.  A  regulation  "  belonging  to  the 
administration  of  banks  rather  than  to  legal  enact- 
ments "  comprehends  the  clearing-house  constituted  as 
a  private  and  voluntary  association,  unchartered,  and  in 
fact  unknown  to  the  law.  The  remedy  for  the  "  danger- 
ous expansions  of  discounts  and  issues  "  and  for  the  ''  re- 


/^ 


1 32  CLEARING-HOUSES 

laxation  and  serious  inconveniences  "  is  afforded  by  the 
very  system  which  he  proposed;  and  the  ''  want  of  a  com- 
mon medium  other  than  specie  for  effecting  the  payment 
of  balances  "  which  was  the  ''  principal  difficulty  in  the 
way  of  an  arrangement  for  that  purpose,"  strikingly  sug- 
gests the  clearing-house  gold  coin  and  legal  tender  cer- 
tificates in  use  at  the  present  day.  The  problem  of  the 
''  unpopular  and  inconvenient  system  of  drawing  and  re- 
drawing specie  from  and  into  the  banks  "  has  met  its 
solution  in  the  clearing-house,  and  the  '*  general  cash 
office,  in  which  each  bank  should  place  a  sum  in  specie," 
is  represented  in  the  present  coin  depository. 

The  proposition  that  the  specie  deposited  by  each 
bank  should  "  be  carried  to  its  credit  in  the  books  of  the 
office,"  savors  of  the  London,  rather  than  of  the  Ameri- 
can, plan.  The  extension  of  the  clearing-house  system 
is  a  partial  fulfilment  of  the  remark  that  "  some  similar 
arrangement  might  be  made  in  every  other  county  or 
larger  convenient  district  of  the  State,"  and  the  absence 
of  the  coin  depository  in  the  smaller  cities  is  in  keeping 
with  the  idea  that ''  it  would  not  be  necessary  to  establish 
a  general  cash  office  in  such  places."  The  payment  of 
balances  in  most  of  the  smaller  clearing-houses,  by  drafts 
on  New  York  and  other  large  centres,  is  a  remarkable 
confirmation  of  the  idea  that  "  balances  due  by  the  banks 
in  each  district  might  be  paid  by  drafts  on  New  York  or 
any  other  place  agreed  on." 

But  the  times  were  not  ripe  for  the  scheme  thus  pro- 
posed. Mr.  Gallatin  was  thinking  in  advance  of  the  age. 
More  than  twenty  years  passed  by  before  his  fellow- 
bankers  could  appreciate  the  wisdom  of  his  suggestions. 


THE   NEW    YORK   CLEARING-HOUSE  133 

In  time,  however,  the  question  began  to  be  more  gen- 
erally discussed.  For  nearly  a  year  it  was  under  con- 
sideration, and  finally  it  was  deemed  advisable  to  call  a 
meeting  to  take  decisive  action  upon  it. 

On  August  23,  1853,  sixteen  presidents,  one  vice-presi- 
dent, and  twenty-one  cashiers,  representing  thirty-eight 
banks,  assembled  in  the  directors'  room  of  the  Mer- 
chants' Bank,  and  at  this  meeting  a  resolution  was 
passed  providing  that  "  a  committee  be  appointed  to  pro- 
cure or  hire  a  suitable  room  in  or  near  Wall  street,  for 
the  purpose  of  holding  meetings  of  the  of^cers  of  the 
city  banks;  that  the  said  committee  be  requested  to  sub- 
mit a  plan  at  an  adjourned  meeting  of  this  body,  to  sim- 
plify the  system  of  making  exchanges  and  settling  the 
daily  balances;  and  that  when  a  room  is  procured  or 
hired  for  the  above  purpose,  the  president  or  cashiers  be 
requested  to  meet  weekly  until  a  plan  is  agreed  upon." 
In  compliance  with  this  request,  the  committee  pre- 
sented a  plan  for  the  daily  settlement  of  balances,  at  a 
meeting  held  on  August  31,  1853,  which  plan  was 
amended  so  as  to  provide  "  that  a  room  be  procured  for 
that  purpose,  sullficiently  large  to  afTord  suitable  accom- 
modations." 

On  September  13,  1853,  the  scheme  was  adopted  and 
the  committee  was  "  clothed  with  full  power  to  hire  a 
room,  appoint  a  manager  and  clerks,  and  make  all  the 
necessary  arrangements  to  carry  the  plan  for  a  clearing- 
house into  efifect."  On  October  4th  the  date  for  begin- 
ning operations  was  fixed  for  October  nth.  Accord- 
ingly, on  the  appointed  day,  the  representatives  of  the 
banks,  members  of  the  association,  met  in  a  room  which 


UNIVERSITY 


134  CLEARING-HOUSES 

had  been  procured  in  the  basement  at  No.  14  Wall  Street, 
and  made  the  first  exchanges.  The  total  clearings  on 
that  day  were  twenty-two  million  six  hundred  and  forty- 
eight  thousand  one  hundred  and  nine  dollars  and  eighty- 
seven  cents,  and  the  balances  were  one  million  two  hun- 
dred and  ninety  thousand  five  hundred  and  seventy-two 
dollars  and  thirty-eight  cents.  These  clearings  have 
since  been  eclipsed  by  over  thirty  millions  of  dollars  in 
the  totals  of  a  single  bank. 

The  clearing  system  in  America  was  thus  fairly 
launched,  and  from  that  time  forth  its  success  exceeded 
the  expectations  of  even  its  most  ardent  projectors. 
The  association  consisted  at  that  time  of  fifty-two  banks, 
banded  together  for  their  common  good,  which,  as  they 
then  conceived,  consisted  solely  in  the  exchange  of  items 
and  settlement  of  balances  at  a  uniform  time  and  place. 
For  nearly  a  year  the  operations  were  conducted  without 
a  constitution.  The  adoption  of  such  an  instrument 
was  opposed,  on  the  ground  that  it  was  not  needed  and 
might  lead  to  a  dangerous  concentration  of  power  in 
the  hands  of  a  few  managers,  who  might  use  it  for  per- 
sonal aggrandizement,  or  for  the  exercise  of  an  arbitrary 
supervision.  But  the  need  of  fixed  rules  of  some  sort 
for  their  guidance  became  more  and  more  urgent,  and 
on  February  28,  1854,  one  of  the  bank  officers  ''  recom- 
mended that  an  act  of  incorporation  be  obtained  for  the 
clearing-house,  or  that  some  other  form  of  organization 
be  adopted,  with  a  constitution  and  laws  for  its  govern- 
ment, providing  for  regular  meetings  of  bank  officers." 

A  constitution  was  drafted  by  George  Curtis,  and 
upon  June  6,  1854,  it  was  adopted  and  ordered  sent  to 


THE   NEW   YORK   CLEARING-HOUSE  135 

the  several  banks  for  their  action.  Upon  August  ist  it 
was  signed  by  each  of  the  members  and  thereby  put 
into  full  force  and  operation.  This  instrument,  with 
the  changes  that  have  been  made  from  time  to  time  by 
the  adoption  of  amendments  and  resolutions,  is  in  force 
at  the  present  day. 

The  subject  of  proper  accommodations  for  the  trans- 
actions of  the  clearing-house  was  frequently  considered. 
As  already  shown,  the  original  location  was  fixed  at 
No.  14  Wall  Street,  but  the  quarters  were  not  entirely 
suitable,  and  hence,  on  May  i,  1854,  the  seat  of  oper- 
ations was  transferred  to  No.  82  Broadway.  At  a  meet- 
ing held  in  May,  1857,  a  committee  was  appointed  to 
consider  the  subject  of  removal  from  that  locality.  One 
month  later  the  committee  reported  in  favor  of  occupy- 
ing a  room  in  the  building  of  the  Bank  of  New  York,  at 
No.  48  Wall  Street,  and  their  report  was  adopted.  In 
March,  1858,  the  association  first  met  in  the  new  rooms. 
At  a  meeting  held  five  years  thereafter,  the  question  of 
removing  to  a  more  central  location  was  discussed,  but 
it  was  voted  to  be  inexpedient  to  consider  the  subject  of 
removal  at  that  time. 

At  a  meeting  on  the  24th  of  June,  1868,  a  committee 
was  appointed  to  select  suitable  rooms  for  the  use  of  the 
clearing-house  and  meetings  of  bank  officers;  and  the 
chairman  of  the  committee,  in  his  report  to  the  associa- 
tion on  October  15,  1869,  stated  that  they  "had  been 
unable  to  find  such  rooms;  but  that  the  building  then 
being  erected  by  the  Equitable  Life  Insurance  Com- 
pany, on  Broadway,  corner  of  Cedar  Street,  had  been 
under  consideration,  but  it  was  found  that  sufficient  and 


136  CLEARING-HOUSES 

suitable  room  could  not  be  had  in  that  building,  and  rec- 
ommended that  the  association  purchase  a  building  and 
fit  it  up  to  meet  the  wants  of  the  clearing-house  and  the 
banks."  At  a  subsequent  meeting  the  committee  was 
requested  by  resolution  to  renew  their  efforts  to  procure 
suitable  rooms.  Meanwhile  the  association  had  been 
accumulating  a  building  fund,  which  by  October,  1874, 
amounted  to  over  ninety  thousand  dollars. 

Some  time  expired  before  an  opportunity  offered  for 
the  purchase  of  available  property.  Finally,  the  Na- 
tional Bank  of  the  Commonwealth  Building,  on  the  cor- 
ner of  Nassau  and  Pine  Streets,  was  advertised  to  be 
sold  at  public  auction  on  October  13,  1874,  and  the  com- 
mittee was  instructed  by  a  vote  of  forty-one  to  five  tc 
purchase  it  at  any  price  that  was  satisfactory  to  it.  Ac- 
cordingly, the  committee  attended  the  sale  and  pur- 
chased the  property  for  two  hundred  and  fifteen  thousand 
dollars. 

In  payment  of  this  sum,  seventy-five  thousand  dollars 
was  borrowed  on  the  securities  in  the  hands  of  the  com- 
mittee, and  for  the  remaining  cost  and  contemplated 
improvements  in  the  building,  a  draft  was  made  upon 
the  associated  banks,  at  the  rate  of  twenty-two-one-hun- 
dredths  of  one  per  cent,  on  their  respective  capitals.  In 
return  therefor  each  bank  received  a  certificate  from  the 
trustees,  with  the  stipulated  agreement  that  it  should  re- 
ceive thereafter  a  proper  consideration  for  the  amount 
advanced.  Subsequent  drafts  were  made  upon  the 
members,  in  proportion  to  their  capital,  as  in  the  previous 
instance,  for  the  purpose  of  defraying  the  cost  of  im- 
provements, including  the  furniture  and  fixtures  of  the 


THE   NEW   YORK   CLEARING-HOUSE  137 

new  building.  The  drafts  in  total  amounted  to  three- 
tenths  of  one  per  cent,  of  the  respective  capitals  of  the 
banks.  In  return  for  the  amounts  so  advanced  certifi- 
cates were  given  as  before. 

The  bank  building  was  properly  altered  and  equipped 
for  the  transactions  of  the  clearing-house,  and  on  June 
17,  1875,  the  premises  were  occupied.  Here  the  clear- 
ing-house remained  for  the  next  twenty-one  years.  At 
a  meeting  of  the  association,  April  20,  1892,  the  atten- 
tion of  the  clearing-house  committee  was  called  to  the 
probable  necessity  of  securing  before  many  years  a 
larger  and  more  commodious  building  for  clearing- 
house purposes.  As  the  result  the  committee  was  in- 
structed to  consider  the  matter  and  report.  The  same 
committee,  in  conjunction  with  the  trustees,  was  author- 
ized at  a  meeting  on  December  29,  1893,  to  acquire  for 
use  of  the  association  the  property  known  as  79  to  83 
Cedar  Street,  and  to  sell  the  property  on  the  corner  of 
Pine  and  Nassau  Streets. 

A  meeting  of  the  association  was  held  January  16, 
1894,  when  it  was  unanimously  resolved  "  that  the  clear- 
ing-house committee  be  authorized  to  organize  a  cor- 
poration to  take  title  to  the  property  just  purchased,  to 
be  known  as  the  New  York  Clearing-house  Building 
Company;  to  draw  upon  all  the  banks  represented,  in 
proportion  to  their  respective  capitals  and  surplus,  for 
all  money  needed  to  pay  for  the  said  property,  and  for 
the  erection,  fitting  up,  and  furnishing  of  a  building 
thereon,  suitable  for  the  use  of  the  association;  to  issue 
to  each  of  the  banks  so  paying  a  receipt  for  such  pay- 
ment, in  such  form  as  shall  be  approved  by  counsel,  and 


1 38  CLEARING-HOUSES 

to  apply  the  money  so  received  to  the  purchase  of  the 
said  land,  and  to  supply  the  said  building  company  with 
funds  to  defray  the  cost  of  the  erecting  and  furnishing 
of  the  said  building." 

A  form  of  receipt  was  adopted,  certifying  that  the 
bank  specified  therein  had  paid  to  the  Clearing-house 
Association  the  sum  named  toward  the  purchase  of  the 
real  estate  in  Cedar  Street  for  the  use  of  the  banks,  mem- 
bers of  the  association,  and  that  the  said  bank  is  entitled 
to  interest  upon  the  said  amount  at  the  rate  of  five  per 
cent.,  and  further  providing  that  the  bank  shall  not  trans- 
fer the  certificate  while  a  member  of  the  association;  and 
if  it  shall  at  any  time  cease  to  be  a  member,  then  the  asso- 
ciation shall  have  a  prior  right  to  purchase  the  certifi- 
cate at  a  price  not  exceeding  the  amount  named  and 
interest. 

The  Cedar  Street  property  was  duly  bought  and  the 
corporation  organized  to  take  the  title.  The  capital 
stock  of  the  corporation  was  fixed  at  nine  hundred  thou- 
sand dollars.  For  this  nine  thousand  shares  were  issued 
—eight  thousand  nine  hundred  and  seventy-five  in  the 
name  of  the  president  of  the  Clearing-house  Associa- 
tion, and  twenty-five  in  the  name  of  the  five  directors  of 
the  Clearing-house  Building  Company,  who  held  the 
same  in  trust.  The  banks  paid  to  the  clearing-house 
committee  the  full  amount  of  the  shares,  for  which,  in 
turn,  they  received  the  certificates.  In  addition,  the  sum 
of  two  hundred  and  thirty  thousand  dollars  was  col- 
lected from  the  members  as  a  final  assessment  for  the 
erection  of  the  new  building,  and  for  this  amount  cer- 
tificates were  issued  in  due  form,  and  these,  with  the 


New  York  Clearing-house. 


I40  CLEARING-HOUSES 

nine  hundred  thousand  dollars  previously  issued,  made 
one  million  one  hundred  and  thirty  thousand  dollars  of 
certificates  outstanding.  The  final  report  of  the  com- 
mittee showed  that  the  cost  of  the  building  was  one 
million  ninety-nine  thousand  five  hundred  and  sixty-nine 
dollars  and  seventy-two  cents. 

The  new  building,  two  views  of  which  are  given  here- 
with, in  which  the  association  took  up  its  abode  in  the 
middle  of  January,  1896,  is  built  of  white  marble,  in  the 
Italian  Renaissance  style.  It  is  an  adornment  to  the 
city  and  is  one  of  the  architectural  gems  of  the  world. 

Thus  we  have  seen  that  the  association  occupied  four 
different  locations  before  coming  into  the  structure 
erected  for  its  own  use;  and  that  after  each  removal  it 
remained  longer  than  it  had  in  the  quarters  just  aban- 
doned. 

The  constitution  of  the  New  York  Clearing-house 
provides  in  full  for  the  regulation  of  the  affairs  of  the 
association  and  for  the  guidance  of  its  members.  A 
general  meeting  is  held  annually,  and  special  meetings 
may  be  called  by  the  clearing-house  committee  when- 
ever it  may  deem  it  necessary,  or  whenever  it  is  requested 
to  do  so  by  any  seven  of  the  associated  banks.  A  ma- 
jority of  the  whole  number  of  associated  banks  consti- 
tutes a  quorum.  Each  bank  may  be  represented  at  all 
meetings  of  the  association,  and  is  entitled  to  one  vote. 

The  administration  of  the  clearing-house  is  vested  in 
a  president,  secretary,  manager,  assistant  manager,  and 
five  standing  committees. 

The  president  is  elected  by  ballot,  at  the  annual  meet- 
ing, to  preside  at  that  meeting  and  all  subsequent  meet- 


New  York  Clearing-house.  View  down  Cedar  Street  from  a  Point  near 
Broadway.  Taken  when  the  Excavation  for  the  American  Exchange 
National  Bank  was  in  Progress. 


142  CLEARING-HOUSES 

ings  during  the  year.  He  is  ex-oMcio  member  of  all 
committees,  except  the  committee  on  nommations.  In 
his  absence  a  chairman  pro  tern,  is  appointed. 

The  secretary  is  elected  at  the  same  meeting,  and  it  is 
his  duty. to  record  the  minutes  of  each  meeting  of  the 
association. 

The  manager,  under  the  control  of  the  clearing-house 
committee,  has  full  charge  of  all  business  at  the  clearing- 
house, but  before  entering  upon  his  duties  he  is  required 
to  give  bond  in  the  sum  of  ten  thousand  dollars.  The 
clerks  of  the  establishment,  as  well  as  the  settHng  clerks 
and  porters  of  the  several  associated  banks,  while  at 
the  clearing-house,  are  under  his  direction.  He  super- 
intends the  operation  of  clearing,  the  adjustment  and 
settlement  of  balances,  the  keeping  of  the  records  of 
transactions  as  they  take  place  from  day  to  day,  the 
preparation  and  publication  of  the  weekly  bank-state- 
ments, and,  in  a  word,  attends  to  all  the  detail  work  of 
the  clearing-house.  He  imposes  and  collects  fines  from 
the  members  for  the  violation  of  clearing-house  rules, 
and  acts  as  secretary  of  all  the  committees  when  they 
meet  at  the  clearing-house. 

Although  the  constitution  provides  for  the  appoint- 
ment of  a  manager  annually,  it  is  the  custom  to  retain 
the  same  one  in  ofifice  year  after  year.  As  a  fact,  there 
have  been  only  three  managers  in  the  whole  history  of 
the  association.  The  first,  George  D.  Lyman,  served 
until  1864,  when  he  was  succeeded  by  William  A.  Camp, 
who,  after  a  long  and  honorable  career  of  twenty-eight 
years  as  manager,  resigned  in  1892,  and  William  Sherer, 
who  had  been  assistant  manager,  was  appointed  to  sue- 


View  in  Manager's  and  Assistant  Manager's  Rooms,  New  York  Clearing-house 


144  CLEARING-HOUSES 

ceed  him.  The  present  assistant  manager  is  William  J. 
Gilpin. 

The  various  committees  of  the  clearing-house  em- 
brace the  clearing-house  committee,  the  conference 
committee,  the  committee  on  admissions,  the  nominat- 
ing committee,  and  the  arbitration  committee.  Each 
committee  consists  of  five  members.  The  first  three 
committees  were  provided  for  in  the  constitution  orig- 
inally adopted.  The  committee  on  arbitration  was 
proposed  in  an  amendment  January  ii,  1855,  by  George 
Curtis,  who  drafted  the  constitution.  This  amendment 
was  subsequently  adopted.  On  September  22,  187 1, 
the  nominating  committee  was  created  by  resolution. 
Besides  these,  a  loan  committee  has  been  appointed  on 
special  occasions,  whose  functions  are  described  in  the 
chapter  on  clearing-house  loan  certificates. 

The  clearing-house  committee  is  clothed  with  almost 
absolute  power,  being  second  in  authority  only  to  the 
association  itself.  The  ablest  and  most  experienced 
bank  officers,  therefore,  are  usually  chosen  to  serve  on 
it.  The  committee  is  elected  annually,  and  is  charged 
with  the  responsibility  of  equipping  the  clearing-house 
with  furniture,  providing  fuel,  stationery,  and  what- 
ever else  is  necessary  for  the  convenient  transaction  of  its 
business,  of  appointing  a  manager  and  his  subordinates, 
of  establishing  rules  and  regulations  to  be  observed  at 
the  clearing-house,  not  provided  for  in  the  constitution, 
always,  however,  subject  to  the  approval  of  the  associa- 
tion, and  of  generally  supervising  the  clearing-house 
afYairs.  This  committee  has  charge  of  the  funds  be- 
longing to  the  association,  and  draws  on  each  bank  for 


THE   NEW   YORK   CLEARING-HOUSE  145 

its  quota  of  expenses.  At  the  first  meeting  of  the  asso- 
ciation after  the  election  of  the  committee  it  submits 
detailed  estimates  of  the  expenditures  that  will  be  re- 
quired for  the  clearing-house  during  the  current  year. 
It  fixes  the  salaries  of  the  clerks  and  approves  the  bonds 
which  are  required  before  they  can  enter  upon  their 
duties.  It  has  power  to  remove  the  manager  or  any  of 
the  clerks,  whenever  it  may  deem  it  for  the  best  inter- 
ests of  the  association  so  to  do.  The  committee  is  also 
empowered  to  examine,  if  necessary,  any  member  of  the 
association,  and  to  require  therefrom  securities  of  such 
an  amount  and  character  as  may  appear  to  it  to  be  suffi- 
cient for  the  protection  of  the  balances  resulting  from 
exchanges  at  the  clearing-house.  By  resolution  adopted 
October  14,  1890,  this  committee  is  empowered  to  per- 
mit or  refuse  to  any  member  the  privilege  of  clearing  for 
an  outside  institution.  It  is  directed,  whenever  in  its 
judgment  legal  tender  notes  have  been  A^ithdrawn  fron^ 
use  through  the  agency  of  any  bank,  member  of  the 
association,  to  make  an  immediate  examinarfTon  of  the 
bank  in  question,  and  should  there  appear  to  be  com- 
plicity on  the  part  of  the  bank  or  its  officials,  to  suspend 
said  bank  from  the  clearing-house  until  the  action  of  the 
association  is  taken  thereon. 

The  conference  committee  is  annually  elected,  and  its 
function  is,  in  concurrence  with  the  clearing-house  com- 
mittee, to  suspend  any  bank  from  the  privileges  of  the 
clearing-house,  in  cases  of  extreme  necessity,  until  the 
pleasure  of  the  association  is  ascertained  thereon.  No 
such  suspension,  however,  can  take  place  unless  a  ma- 
jority, at  least,  of  each  of  these  two  committees  is  present 


146  CLEARING-HOUSES 

at  the  ordering  thereof,  or  unless  the  vote  be  unanimous. 
In  case  of  suspension,  the  committee  is  required  to  call  a 
general  meeting  of  the  association  to  take  the  matter 
into  consideration. 

The  committee  on  admissions  is  appointed  at  each 
annual  meeting  by  the  president,  and  the  clearing-house 
committee  refers  thereto  for  examination  all  applications 
for  admission  into  the  association. 

The  nominating  committee  is  chosen  annually,  and  its 
duty  is  to  present  to  the  association  at  each  annual  meet- 
ing the  names  of  candidates  for  president  and  secretary 
of  the  association,  and  for  members  of  the  clearing-house, 
nominating,  and  conference  committees,  on  the  following 
basis:  The  president  and  secretary  are  eligible  for  two 
successive  years,  and  after  an  interval  of  one  year  they 
are  again  eligible  in  like  manner.  There  must  be 
selected  every  year  at  least  two  members  on  each  of  the 
committees  (having  still  three  old  members),  and  those 
who  have  .been  longest  on  the  committees  must  go  ofif 
first.  If  all  have  been  on  the  same  length  of  time,  then 
two  must  go  ofif  by  lot.  After  an  interval  of  one  year 
such  members  are  again  eligible. 

The  arbitration  committee  is  appointed  annually  by 
the  president,  and  its  function  is  to  hear  and  determine 
all  disputes  submitted  to  it  by  both  parties  thereto,  one 
or  both  of  which  are  members  of  the  association.  It  is 
the  duty  of  this  committee  also  to  record  a  brief  ab- 
stract of  each  case  referred  to  it,  together  with  its  decis- 
ion thereon,  in  a  book  provided  for  that  purpose,  which 
book  is  kept  at  the  clearing-house,  open  to  the  inspec- 
tion of  all  the  members. 


THE   NEW   YORK   CLEARING-HOUSE  147 

The  association  at  present  consists  of  sixty-three  mem- 
bers (forty-four  national  banks,  nineteen  State  banks) 
and  the  United  States  Sub-treasury  located  at  New 
York.  The  latter  makes  its  exchanges  only  at  the  clear- 
ing-house, its  balances  being  settled  at  its  own  counter. 
It  has  no  voice  in  the  government  of  the  association,  and 
pays  a  nominal  sum  for  actual  expenses.  The  privilege 
which  the  sub-treasury  enjoys  of  making  its  exchanges 
through  the  clearing-house  is  a  matter  of  great  accom- 
modation both  to  the  Sub-treasury  and  to  the  banks. 
The  New  York  Post-office  clears  through  one  of  the 
members,  but  renders  no  compensation  to  the  associa- 
tion for  the  privilege. 

The  membership  of  the  association  since  its  organiza- 
tion has  been  constantly  changing,  owing  to  the  admis- 
sion and  expulsion  of  members  and  voluntary  with- 
drawals, as  provided  by  the  constitution. 

The  association  began  with  fifty-one  members,  but  by 
1858  the  list  had  declined  to  forty-six,  the  lowest  num- 
ber in  the  history  of  the  clearing-house.  A  member- 
ship of  sixty-seven  was  attained  in  1895. 

On  February  28,  1854,  the  Bank  of  the  Union  was  ex- 
pelled, and  the  clearing-house  committee  was  authorized 
to  return  to  it  whatever  amount  was  necessary  to  ofifset 
its  advances  toward  the  expenses  of  the  clearing-house. 
On  the  following  December  the  Empire  City  Bank  was 
expelled,  and  a  similar  resolution  passed;  but  in  no  case 
thereafter  were  any  such  refunds  made. 

The  association  came  into  existence,  as  has  been 
stated,  in  1853,  but  it  was  not  until  February  29,  1856, 
that  the  first  additional  bank  was  admitted,  four  banks 


148  CLEARING-HOUSES 

having  been  expelled  in  the  meantime.  The  list  con- 
tinued to  vary  from  this  time  forth,  at  irregular  intervals, 
there  having  been  in  the  entire  history  of  the  association 
forty-two  admissions,  ten  expulsions,  twelve  withdrawals, 
and  nine  banks  dropped. 

The  constitution  is  very  explicit  in  its  terms  regarding 
the  admission  and  conduct  of  members.  Applicants  are 
first  considered  by  the  clearing-house  committee  and 
referred  hence  to  the  committee  on  admissions.  The 
latter,  if  in  its  opinion  the  applicants  are  qualified  for 
membership,  refers  them  to  the  association  for  final 
action,  a  three-fourths  vote  of  those  present  being  neces- 
sary to  admission.  Banks  may  be  elected  to  member- 
ship at  any  meeting  of  the  association,  but,  before  being 
considered  by  the  clearing-house  committee,  each  appli- 
cant must  be  shown  to  have  a  capital  or  combined  cap- 
ital and,  surplus  of  at  least  five  hundred  thousand  dollars. 
Each  new  member  is  required  to  signify  its  assent  to  the 
constitution,  in  the  same  manner  as  the  original  mem- 
bers, and  to  pay  an  admission  fee  according  to  capital, 
as  follows:  A  bank,  the  capital  of  which  does  not  ex- 
ceed five  million  dollars,  must  pay  five  thousand  dollars; 
a  bank,  the  capital  of  which  exceeds  five  million  dollars, 
must  pay  seven  thousand  five  hundred  dollars.  Any 
member  increasing  its  capital  is  required  to  pay  in  ac- 
cordance with  those  rates. 

The  admission  charges  have  not  always  been  the  same. 
The  original  members  paid  no  admission  fee.  In  the 
constitution,  as  originally  adopted,  the  rate  was  fixed 
at  five  hundred  dollars.  This  was  raised  to  one  thou- 
sand dollars  by  an  amendment  adopted  October   ii, 


THE   NEW   YORK   CLEARING-HOUSE 


149 


1854.  Under  the  constitution,  as  revised  in  1865,  the 
fees  were  based  on  the  capital  as  follows :  For  banks 
whose  capital  did  not  exceed  five  hundred  thousand  dol- 
lars, the  rate  was  fixed  at  one  thousand  dollars;  for 
those  whose  capital  did  not  exceed  one  million  dollars, 
at  two  thousand  dollars;  for  those  whose  capital  did  not 
exceed  two  million  dollars,  at  three  thousand  dollars;  for 
those  whose  capital  did  not  exceed  three  million  dollars, 
at  four  thousand  dollars;  for  those  whose  capital  did  not 
exceed  five  million  dollars,  at  five  thousand  dollars;  and 
for  those  whose  capital  exceeded  five  million  dollars,  at 
seven  thousand  five  hundred  dollars.  On  October  3, 
1893,  the  amendment  was  adopted,  fixing  the  rates  on 
the  present  basis. 

The  power  of  expulsion  is  lodged  in  the  association, 
but  can  be  exercised  only  by  a  majority  vote  of  all  the 
members.  The  power  of  suspension  is  vested  jointly 
in  the  conference  and  the  clearing-house  committees. 
Any  member  may  withdraw  at  pleasure  after  paying  its 
due  proportion  of  all  expenses  incurred  and  signifying 
its  intention  to  withdraw  to  the  clearing-house  com- 
mittee. 

There  were  some  fifty-seven  banks  in  operation  in 
New  York  when  the  clearing-house  was  organized,  and 
all  but  five  came  into  the  association,  those  remaining 
outside  being  small  institutions.  Subsequently  two  or 
three  of  these  applied  for  admission,  but  inasmuch  as 
they  were  not  deemed  capable  of  meeting  the  require- 
ments imposed  upon  the  existing  members,  they  were 
rejected.  At  the  present  time  sixty-two  per  cent,  of  the 
banks  are  members.     In  the  city  and  vicinity  are  eighty- 


150  CLEARING-HOUSES 

three  banks  and  trust  companies  non-members,  as  com- 
pared with  the  sixty-three  members.  The  nature  of  the 
business  of  the  non-members,  however,  quite  as  much  as 
that  of  member-banks,  demands  that  their  exchanges  go 
through  the  clearing-house,  and  hence  each  such  bank 
or  trust  company  makes  a  special  engagement  with  some 
member  to  act  as  its  clearing  agent,  upon  such  terms 
of  security  as  they  may  agree  upon.  At  present  there 
are  seventy-three  outside  institutions  making  their  ex- 
changes in  this  way. 

At  the  beginning  the  subject  of  clearing  for  non-mem- 
bers naturally  did  not  attract  much  attention,  but  as  the 
city  grew  in  business  importance  and  its  banks  increased 
in  power  and  numbers,  it  began  to  be  more  seriously 
considered.  Several  amendments  were  made  to  the 
constitution,  designed  to  regulate  the  action  of  non- 
members  and  determine  their  relation  to  members.  -  On 
January  ii,  1855,  George  Curtis,  to  whom  reference  has 
already  been  made  as  tEe  author  of  the  constitution,  pro- 
posed the  first  amendment  on  this  subject,  which  was 
subsequently  adopted  as  follows : 

"  Whenever  exchanges  shall  have  been  made  at  the 
clearing-house,  by  previous  arrangement  between  ^mem- 
bers of  the  association,  through  one  oLtheir  number  and 
banks  in  the  city  and  vicinity  who  are  not  members,  the 
receiving  bank  Qt  the  ckaring-house-shalLin  no  case 
discontinue  the  arrangement  without  giving  previous 
notice,  which  shall  not  take  effect  until  the  exchanges  of 
the  morning  following  the  receipt  of  such  notice  shall 
have  been  completed." 

It  will  be  observed  that  no  provision  is  made  for  the 


THE   NEW   YORK   CLEARING-HOUSE  151 

protection  of  banks  against  the  insolvency  of  non-mem- 
bers, but  that  the  clearing  member  is  made  responsible 
for  the  items  drawn  upon  the  non-member,  and  is  pre- 
vented from  discontinuing  such  responsibility  until  the. 
exchanges  are  completed  on  the  day  following  the  re- 
ceipt of  such  notice.  The  next  resolution  on  the  sub- 
ject was  adopted  ten  years  later,  and  is  as  follows: 

"  Resolved,  That  no  member  of  the  Clearing-house 
Association  shall  be  allowed  to  make  the  exchanges  for 
or  redeem  the  notes  or  checks  of  any  other  bank  or  banks 
not  members  of  said  association,  without 'first  giving 
notice,  over  the  signature  .of  one  of  its  ofificers,  of  the 
fact  of  such  redemption;  ripv  shall  such  redemption  be 
discontinued  but  upon  notice  in  the  manner  prescribed 
by  Section  25  of  the  constitution." 

Here  for  the  first  time  a  requirement  was  made  of  the 
banks  that  they  should  give  notice  of  their  intention  to 
clear  for  non-members.  Again,  in  the  same  year,  an- 
other amendment  followed.     Thus: 

"  Whenever  any  member  of  the  association  shall  send 
through  the  clearing-house  exchanges  of  any  bank  or 
banks  in  the  city  or  vicinity  who  are  not  members,  such 
sending  shall  ipso  facto  and  without  further  notice  con- 
stitute said  member  the  agent  for  said  bank  or  banks  at 
the  clearing-house;  and  said  member  shall  be  liable  in 
the  premises,  the  same  as  for  its  own  transactions,  and  its 
liability  in  all  such  cases  shall  continue  until  after  the 
completion  of  the  exchanges  of  the  morning  next  fol- 
lowing the  receipt  of  notice  of  discontinuance  of  any  such 
agency." 

This  virtually  repealed  the  former  resolution  requiring 


152 


CLEARING-HOUSES 


notice  of  the  creation  of  a  clearing  agency.  It  con- 
tinued the  requirement  of  a  previous  notice  before  dis- 
continuing such  agency,  and  clearly  established  the 
measure  of  liability  of  the  clearing  member  for  the  items 
of  the  non-member.  As  if  to  reinforce  the  above  resolu- 
tion, another  v^as  adopted  in  May  of  the  following  year, 
as  follows : 

"  Resolved,  That  the  liabilities  of  banks  in  the  clearing- 
house doing  business  for  the  banks  in  the  vicinity  are, 
under  the  amendment  to  the  constitution,  passed  April 
26,  1865,  the  same  as  for  their  own  transactions." 

Clearing  for  non-members  continued  for  nearly  a  quar- 
ter of  a  century  without  further  regulation.  Finally,  in 
1890,  new  troubles  arose  from  the  failure  of  two  small 
banks  clearing  through  member-banks  and  the  looting 
of  the  Sixth  National  Bank,  a  member.  Accordingly, 
the  whole  subject  of  clearing  for  non-members  was  most 
carefully  investigated  and  considered.  Many  favored  its 
discontinuance  altogether,  and  finally  the  question  was 
referred  to  a  committee.  A  majority  of  the  committee 
reported  in  favor  of  discontinuance,  and  a  minority  in 
support  of  the  prevailing  plan.  The  association  adopted 
the  views  of  the  minority  and  voted  to  continue  on  the 
existing  basis.  This  led  to  the  following  resolution, 
adopted  October  14,  1890: 

''Resolved,  That  on  and  after  January  i,  1891,  this 
association  permits  its  members  to  make  such  exchanges 
only  after  the  consent  of  the  clearing-house  committee  is 
obtained;  and  the  banks  or  parties  have  obligated  them- 
selves to  pay  to  the  Clearing-house  Association  an  annual 
payment  of  two  hundred  dollars,  and  also  consent  to  the 


TY 
THE   NEW   YORK   CLEARING-HOU?^'^'-'''^-^-^^^ 

same  examinations  as  are  now  required  of  its  members, 
provided,  however,  that  nothing  contained  in  this  resolu- 
tion is  construed  as  making  such  banks  or  parties  mem- 
bers of  the  association." 

Thus,  discretion  regarding  the  clearing  for  non-mem- 
bers was  taken  out  of  the  hands  of  the  members  and 
transferred  to  the  clearing-house  committee,  and  for  the 


New  York, 1900. 

At  a  meeting  of  the  *  Board  of  Directors,  of  the 

of. held 1900, 

the  following  Resolution  was  adopted  : 

^^  Resolved :  That  this  Board  hereby  agrees  to  the  payment 
of  Five  Hundred  ($500)  Dollars  per  annum,  for  the  purpose  of 
making  its  Exchanges  through  a  Bank,  member  of  the  New  York 
Clearing-house  Association. 

'*  And  this  Board  also  consents  to  the  same  examinations  of  this 
as  are  now  required  of  members  of  the  Clearing- 
house Association." 


*  This  title  may  be  changed  to  read 
Board  of  Trustees,  Executive  Committee,  etc.,"  as  necessary. 


Resolution  Authorizing  Exchanges  through  a  Member-bank. 

first  time  non-members  were  required  to  pay  to  the  asso- 
ciation a  definite  sum  in  consideration  of  the  privileges 
extended  to  them.  Again,  on  December  21,  1896,  the 
constitution  was  amended  as  follows : 

"  Resolved,  That  the  amendment  to  the  constitution 
adopted  October  14,  1890,  assessing  banks  and  others 
not  members  of  this  association,  and  clearing  through 


1 54  CLEARING-HOUSES 

members,  two  hundred  dollars  annually,  be  amended  by 
increasing  such  amount  to  five  hundred  dollars  annually, 
this  amendment  to  take  effect  on  and  after  January  i, 

1897." 

A  resolution  was  also  passed,  to  take  effect  on  the 
same  date,  requiring  all  banks,  not  members  of  the  asso- 


New  York, 1900. 

Chairman  Clearing-house  Committee : 
Dear  Sir  : 

The 

of hereby  applies  for  consent 

of  the  Clearing-house  Committee  to   make  the  Exchanges  for 

of on  and  after 

Statement  of  its  condition  enclosed. 

Respectfully, 

Approved 


Application  to  Clear  for  Another  Bank. 

ciation,  whose  checks  are  exchanged  at  the  clearing- 
house, to  furnish  the  manager  weekly  statements  of  their 
condition,  showing  the  average  amount  of  their  loans, 
discounts,  and  investments;  specie,  legal  tender  notes, 
and  bank  notes;  deposit  with  clearing-house  agent,  de- 
posit with  other  New  York  City  and  Brooklyn  banks  and 
trust  companies,  net  deposits,  circulation.     These  state- 


THE   NEW   YORK   CLEARING-HOUSE  155 

ments  were  intended  for  the  records  of  the  clearing- 
house and  not  for  publication;  but  a  resolution  was  sub- 
sequently passed  requiring  that  they  be  published,  be- 
ginning with  the  first  Saturday  in  November,  1897. 

Thus  it  will  be  seen  by  resolutions  and  amendments 
covering  nearly  the  whole  period  of  its  history,  the  New 
York  Clearing-house  Association  has  been  developing 


NEW   YORK   CLEARING-HOUSE, 
Nos.  77-83  Cedar  Street. 


New  York, 1900. 

Esq.,  Cashier. 

Dear  Sir : 

Consent  of  the  Clearing-house  Committee  is  hereby  given  to 

the of 

to  make  the  Exchanges  at  the  New  York  Clearing-house  for  the 

of 

on  and  after subject  to  the  rules  and 

regulations  of  the  Association. 

By  order  of 

Chairman  Clearing-house  Committee. 
Manager. 


Consent  to  Clear  for  Another  Bank. 

the  present  system,  regulating  the  conduct  of  those  out- 
side institutions  which  enjoy  the  privileges  of  the  clear- 
ing-house. No  other  association  in  the  United  States 
even  approximates  that  of  New  York  in  the  rigorous 
conditions  it  imposes  upon  non-member  banks,  and  in 
the  consequent  safeguards  it  has  thrown  around  its 
members. 


.     .     COPY  OF  STATEMENT     .     . 

OF    THE 

for  week 

ending  the day  of 189  , 

as  required  by  Resolution  of  the  Clearing-house  Committee,  of  the 
New  York  Clearing-house  Association,  adopted  December  28,  1896. 


Average  Amount  of  Loans  and  Discounts  and  Invest- 
ments,        

Average  Amount  of  Specie, 

Average  Amount  of  Legal  Tender  Notes  and  Bank  Notes, 

Average  Amount  on  Deposit  with  Clearing-house  Agent, 

*Average  Amount   on   Deposit   with   other  New   York 
City  Banks  and  Trust  Companies,  .... 


Average  Amount  of  Deposits, 
Average  Amount  of  Circulation, 


*  This  item  should  include  amounts  on  deposit  with  Brooklyn  Banks  and  Trust 
Companies. 

NEW    YORK   CLEARING-HOUSE. 

Please  send  a  copy  of  the  Weekly  Statement  of  your  Bank  to  the 

Clearing-house  at  the  close  of  business  on  Friday  of  each  week. 

WILLIAM    SHERER, 

Manager. 


Form  of  Statement  of  Weekly  Averages  of  Brooklyn  Non-member  Banks. 


THE   NEW   YORK   CLEARING-HOUSE  157 

The  relationship  of  trust  companies  to  the  clearing- 
house, particularly  in  view  of  the  number  of  trust  com- 
panies organized  and  entering  upon  business  the  last  few 
years,  has  been  a  subject  for  careful  consideration  upon 
the  part  of  the  management.  A  sub-committee  of  the 
clearing-house  committee  was  appointed  October  26, 
1899,  to  inquire  into  the  matter  and  make  a  report.  The 
report  of  this  sub-committee,  the  substance  of  which  is 
given  below,  was  adopted  at  a  meeting  held  on  the  third 
of  November,  1899. 

The  report  at  the  outset  recites  that  the  constitution 
of  the  association,  particularly  the  amendment  of  Octo- 
ber 14,  1890,  imposes  upon  the  committee  the  responsi- 
bility of  consenting  to  the  clearings  by  banks  and  trust 
companies  not  members  of  the  association.  The  report 
then  continues  that  in  the  opinion  of  the  sub-commit- 
tee, general  and  uniform  rules  from  time  to  time  should 
be  adopted.  Therefore  the  following  are  recom- 
mended : 

"  No  trust  company  shall  be  permitted  to  clear 
through  any  member  or  non-member  of  this  association, 
unless  such  trust  company  shall  have  been  in  actual 
operation  for  at  least  one  year  at  the  time  of  making  the 
application. 

"  No  trust  company  shall  be  cleared  by  any  bank  or 
trust  company,  member  or  non-member  of  this  associa- 
tion, until  it  shall  have  been  examined  by  the  clearing- 
house committee,  or  some  other  committee  of  the  asso- 
ciation duly  appointed  for  such  purpose. 

"  Every  trust  company  clearing  through  a  member  of 
this  association,  or  which  may  hereafter  be  permitted  to 


1 58  CLEARING-HOUSES 

clear  through  such  member,  shall  furnish  a  weekly  state- 
ment of  its  condition  to  the,  manager  of  this  association, 
in  the  same  manner  as  weekly  statements  of  non-mem- 
ber banks  clearing  through  this  association  are  now  ren- 
dered.    Such  statements  shall  include 

Capital, 

Net  profits, 

Average  amount  of  loans  and  discounts  and  investments, 

Average  amount  of  specie, 

Average  amount  of  legal  tender  notes  and  bank  notes, 

Average  amount  on  deposit  with  other  New  York  City  and  Brooklyn 

banks  and  trust  companies. 
Average  amount  of  net  deposits." 

In  the  notice  sent  out  by  the  manager  of  the  clearing- 
house, November  6,  1899,  embodying  the  foregoing,  it 
was  asserted  that  the  statements  demanded  of  the  trust 
companies  were  not  for  the  present  intended  for  publica- 
tion. The  form  of  statement  provided  for  use  in  this 
connection  is  given  among  the  illustrations. 

At  the  meeting  of  the  clearing-house  committee  above 
referred  to,  it  was  also  resolved  that  from  that  date  for- 
ward every  statement  of  averages  submitted  to  the 
clearing-house  by  a  member  or  non-member  should  be 
verified  and  signed  by  an  officer. 

Each  bank  belonging  to  the  New  York  Clearing- 
house Association  is  required  to  furnish  to  the  manager 
weekly,  for  publication,  a  statement  of  its  condition, 
showing  the  average  amount  of  loans  and  discounts, 
specie,  legal  tender  notes,  circulation,  and  deposits.  The 
capital  and  net  profits  also  are  given,  this  being  the  only 
association  which  gives  the  latter  item. 


COPY    OF    STATEMENT 


.for  week 


ending  the day  of i 

as  required  by  Resolution  of  the  Clearing-house  Committee  of  the 
New  York  Clearing-house  Association,  adopted  November  3,  1899. 


Capital  (as  per  latest  statement  of  Banking  Dept.),     •     . 

Surplus  Fund  and  Undivided  Profits  (as  per  latest  state- 
ment to  Banking  Dept.), 

Average  Amount  of  Loans,  Bills  Purchased  and  Invest- 
ments (not  Real  Estate), 

Average  Amount  of  Specie, 

Average  Amount  Legal  Tender  Notes  and  Bank  Notes, 

Average  Amount  on  Deposit  with  other  New  York 
City  Banks  and  Trust  Companies, 


Average  Amount  of  Deposits, 


Correct _ 

NEW   YORK    CLEARING-HOUSE. 

Please  send  a  copy  of  the  Weekly  Statement  of  your  Company 
to  the   Clearing-house  at  the  clOSC  Of   business   on   Friday  of 

eacli  weelc. 

WILLIAM    SHERER, 

Manager. 

Form  of  Statement  Required  by  the  New  York  Clearing-house 
Association  of  Trust  Companies. 


NATIONAL, 


30.. 


Liabilities. 

Capital,       ...... 

Net  Profits, 

Circulation,  .          .         .          .          . 

Due  Banks  and  Trust  Companies,  . 
Due  other  Depositors, 
Unpaid  Dividends, 

Total, 

Resources. 

Loans  and  Discounts,  .         .         . 

U.  S.  Bonds  on  hand,     . 

U.  S.  Bonds  to  secure  circulation, 

U.  S.  Bonds  to  secure  deposits, 

Other  Stocks  and  Bonds  and  Mortg's, 

Premium  on  U.  S.  Bonds, 

Real  Estate,  Furniture,  and  Fixtures, 

Due  from  Banks,         .         .         .         . 

Cash  Items  and  Bank  Notes, 

Specie,        ...... 

Legal  Tenders,       .... 

Over-drafts,        .         .         .         .         . 

Total, 

Certified  Checks,         .          .          .         . 
Exchanges,    ..... 


Form  Used  at  Clearing-house  in  Tabulating  National  Bank  Statements. 


STATE. 

^o 

Liabilities. 

1 

1 

Capital, 

Net  Profits,       .... 

Due  Banks,  .          .         . 

Due  Depositors, 

Unpaid  Dividends, 

Total 

Resources. 

Loans  and  Discounts,    . 

Stocks  and  Bonds  and  Mortgages, 

Real  Estate,           .         .         . 

Due  from  Banks, 

Cash  Items,           .... 

Specie, 

Legal  Tenders  and  Bank  Notes,     . 

Over-drafts,       .... 
Total,           .... 

Exchanges  for  Clearing-house, 

1 

Expenses, 

Certified  Checks,       . 

Form  Used  at  Clearing-house  in  Tabulating  State  Bank  Statements. 


e 

I 

<L>     NO 

O     '^ 
o 

>>       <L> 

n  I- 

^       5» 


■s 

^ 

C/) 

o« 

^ 

« 

a 

c^ 

1^' 

M 

o 

T3 

g 

<L> 

o 

1 

i 

^ 

-< 

C 

<u 

jt^ 

xi 

t: 

•*-• 

o 

>-< 

t4^ 

o 

^ 

4> 

s 

^ 

<L> 

5 

4> 

o. 

& 

o 

(L. 


00 
<N 

a 
< 

(0 

1. 

3 

CO 

bo 

c 

'•5 

c 
o 


•SON 

1  -» 

rO'^vO 

<«• 

i  i  i 

1 

•w-  ' 

:  :  : 

1 

•w 

1- 

:  :  : 

1 

•e^ 

>• 

1 

•c^ 

»• 

:  :  : 

■w- 

:  :  ! 

* 

<» 

i 

•  ^  I 

c/5 

< 

< 

1 
1 

>"■ 

B 

3. 
s 

6- 
1. 

•5J 

si  i 

2.2  e< 

S§o 

•SON  1 

^ 

CC 

')■<^^0 

f>  U| 


4? 


I  it 


S       I 
5      H 


4     § 


in 
x> 

1^ 


1^1 
Mi 

!^  rt  rt 
^  «-o 
-^  c  « 


N    0>  - 

q  q  t^ 

•1    tn  On 

vovo  5 
0  >n  N 

8M    .^00 


•c-cx 

<« 


K 


o  c  o 
c'C  c 
«  «  rt 


?? 


o.  a  a 

<<< 


U      03 


1     ^ 

0) 

0 

0 

o 

\      (0 

(A 

0) 

«) 

CO 

c 

^        (8 

(S 

(8 

(8 

(8 

oc 

2i 

4) 

V 

u 

0 

2J 

C/5 

^ 

0 

0 

Q 

0 

U 

Z 

< 

02 

UJ 

< 

O 

o 

. 

c/5 

CJ) 

C/3 

1 

< 

I 

1 

o 

o 

j 

H 

^ 

Z 

u 

< 
&5 

^ 

^ 

«9 

1^ 

o 

>^ 

> 

r^ 

^ 

^ 

2 
^ 

^ 

S 

0^ 

UJ 

M^ 

^ 

O 

o 
ii: 

^ 

1 

'^ 

■k 

c8    :: 

Q^ 

< 

■k 

•M 

« 

% 

(A 
•♦i» 

■k 

c 

s 

« 

S.     3 

S 

3 

C 

i2 

(0 

o 

o 

8. 

0) 

0) 

S)  s 

c/) 

c 

(8 
O 

<1) 

0 

C8 

c 

o 

c    o 

a 

! 

0) 

3 
O 

C8 
0 

c 

(8 
(8 

leari 
alan 

J 

(0 

J 

z 

o 

O 

tt 

O     CQ 

COPY   OF  STATEMENT 

OF   THE 

for  week 

ending   the day  of 1 89 

as  required  by  Section  16  of  the  Constitution  of  the  New 
York  Clearing-house  Association. 


Average  amount  of  Loans  and  Discounts, 
Average  amount  of  Specie,        ... 
Average  amount  of  Legal  Tender  Notes, 
Average  amount  of  Deposits,    .... 
Average  amount  of  Circulation, 


Please  send  a  copy  of  the  Weekly  Statement  of  your 

Bank  to   the   Clearing-house    de/ore   11   o'clock   A.M.    on 

each  and  every  Saturday. 

WILLIAM    SHERER,  Manager. 

Form  of  Statement  Required  of  Associated  Banks. 


-J-     E 


to    ^    u 

o       »     S 

si 


li 


l| 


II 

IS 

IS 

1 

■  ^     : 

ii 

II 

«c  c  e 

-"a  "a  S-" 


si 


is 


III 


II 


II 1-2   1    SS 


uCb  c 


■III 


i 


8u 


.....  ....!§ 

:  ;  :  •  i  :  :  i  :     :    <S  I 

:  .  :  .  ,  ....      .     ^^ 

:  :  :  :  .  :  :  :  :     :   i» 


*  ^ 


I* 


Vi 

<^? 


caSSc 


;  :  :  :      :    -S-S 

;5-c«    «     «»r 


.Z  a-3 


CO 

ca 

<x> 

a 

•rt 

03 

H 

CO 

"3 

w- 

55 

6 

o 

en 

S-) 

fl 

?' 
M 

1 

.2 

^ 

■| 

^S 

ea 

CO 

■w- 

^ 

^( 

o 
S 

a> 

«  i2 

CO 

*♦- 

ed 

o 

o-s 

OS 

1 

II 

c 

-(^ 

•s 

S 

M 

^ 

J 

Q 

p:^ 

; 

*s 

^ 

<S 

; 

S' 

T3 

s 
^  <« 

1 

•y 

1- 

: 

■»-• 

^  s 

O 

■^     h 

<u 

-t  a 

s 

"S 

3       ^ 

o 

V 

.M 

-= 

^ 

o 

i, 

■w- 

>^ 

^ 

<0 

» 

(^ 

-5 

•s 

-^ 

9" 

^ 

o 

>- 

6 

<LJ 

^ 

•w- 

.,    , 

9> 

.   ; 

.f 

CO 

;  ', 

oa 

13 

> 

c 

^^^! 

Cx3 

Q. 

o    -03 

E-H 

O  :. 

•4 

O 

1/1 

c   •  S2 

IS 

^ 

z 

^ 

.£3 

S-gg 

§ 

^^'S 

•^"^S 

TS 

^  J<!-fl 

ca 

n  c  " 

5 

(MWS 

\0  ^ 


II 

fOro 


o  o 
^^ 
II 


S5^ 


00         O 

i     (0 

5        c 


O-o 


B   . 


rt  »- « 


c«  «n 


c  :i2 

5  ••i 

e«  •  2 

-C  'Li 

C  cjt^ 

<«  4J    Bl 

0)  p. 

O  O   rt 

c  c  H 


-§§ 

i§. 

^s 

2  CO- 
O'S, 

^   ^^1 

R8 

R 

!^^ 

^'^ 

?!^ 

•w- 

V 

Q 

RS 

R 

^Ji^ 

^."?i 

mrx 

<J    w 

<«- 

^1 

^1 

^^ 

Q 

II 

s! 

g^S 

s^ 

•w-'' 

r 

II 

si 

fiS' 

U      M 

.OVO- 

lr{^ 

W- 

Q 

88 

J 

^f 

n 

00' a; 

ii^,^ 

■««■ 

Q 

RR 

R 

fn^ 

M    X 

IT)  N 

-^ 

^ 

•^ 

^8;      - 

i-. 

« -«•        : 

o'j        : 

^   :           • 

ss     : 

so 

-3-^         : 

o  o         : 

T'r    • 

v.  in             S 

c  c           S 

can        ^ 

VOvO                O- 

CJ 

•UOTJBinDJI^    JO 

junouiv  aSBJ3Av 

«4 

o 

•sjisodaQ  ja|«j  jo 

Ov 

sjunouiy  aSBjaAy 

'^ 

■w- 

^ 

■sXuBduio3jsnjr 
1  puB  sjjuBg   uX| 

•r 

-^oojg  puB  Xji3 

A 

IJOA^aNJaqjo 

< 

qjiM  jisodsQ  uo 

w  ^ 

j  juhouiv  sSbjsav 

•«e^ 

; 

CQ  ^ 

•juaSy 

PB 

3snoq-SuuBa[5 
qjiM  jisodaQ  uo 

O  «5? 

lunouiy  aSBasAy 

<«■ 

•    5 

1                    -sajOM 

2  s 

jjuBg  puB  sajOiv[ 

japusj^  jBSaq  jo 

^  M 

lunouiy  dSBJSAy 

^ 

l-l    H 

<l    M 

•apads  JO 

junouiy  33Bj3Ay 

^i 

■w- 

o  g 

•S1U31UJS3AUJ 

:  : 

pUB     SJUnODSIQ 

'.  i 

Mb 

puB    SUBOq    jO 

'  I 

junouiy  aSBjaAy 

:  ; 

o§ 

<«- 

«| 

:  :  '. 

l>^  ? 

^1 

*  Oi 

:  : 

i^ 

i 

pq  '3 

a. 
U 

^     fi 

<«- 

g 

(U 

S 

2    :  :  • 

(/) 

>t'- 

1 

f-  <    :  :  . 

i  ^  -1 

c 
OS 

^ 

< 

§     s     8 


m-     Q 


I  i 


Q 


^  i 
^  2 


s   4^ 


.    .    .  c 
>.^  o  o 

O     C8  «   O   c4 
CT3'^  C 

8:^28 


08  5 


i"  rt  tfl 


:  °-2«  8 


C 

s 


l68  CLEARING-HOUSES 

The  matter  of  collecting  checks  and  other  items  out- 
side of  the  city  of  New  York  is  a  subject  that  for  many 
years  past  has  received  most  careful  thought  upon  the 
part  of  the  officers  and  members  of  the  New  York  Clear- 
ing-house. An  amendment  to  the  constitution  was 
adopted,  March  13,  1899,  directly  bearing  upon  this 
point  and  embodying  a  policy  that  was  so  radical  as  not 
only  to  attract  attention  throughout  the  entire  financial 
community,  but  at  the  outset  to  incite  more  or  less  oppo- 
sition. As  time  has  passed,  however,  the  justness  of  the 
provisions  has  become  apparent  and  the  business  com- 
munity has  acquiesced  in  what  is  manifestly  an  entirely 
reasonable  measure. 

The  amendment  to  the  constitution,  being  an  addition 
to  Section  8,  was  as  follows : 

"  The  clearing-house  committee  shall  have  power  to 
establish  rules  and  regulations  regarding  collections  out- 
side of  the  city  of  New  York,  by  members  of  the  associa- 
tion or  banks  or  trust  companies  or  others  clearing 
through  such  members,  and  the  rates  to  be  charged  for 
such  collections,  and  also  providing  for  enforcement  of 
the  same.  The  committee  may  from  time  to  time  make 
any  additions  to,  or  changes  in,  such  rules  and  regula- 
tions as  it  deems  judicious.  After  any  rule  or  regulation 
upon  the  subject  has  been  once  established,  it  shall  not, 
however,  be  altered  or  rescinded  until  it  has  been  in  force 
at  least  three  months,  except  by  majority  vote  of  the 
Clearing-house  Association." 

Under  this  amendment  the  following  rules  and  regula- 
tions regarding  collections  outside  of  the  city  of  New 
York  were  adopted  by  the  clearing-house  committee : 


THE   NEW   YORK   CLEARING-HOUSE  169 

"  Pursuant  to  authority  conferred  upon  it  by  the  con- 
stitution of  the  New  York  Clearing-house  Association, 
the  clearing-house  committee  of  said  association  estab- 
lishes the  following  rules  and  regulations  regarding  col- 
lections outside  of  the  city  of  New  York,  by  members  of 
the  association,  or  banks,  trust  companies,  or  others 
clearing  through  such  members,  and  the  rates  to  be 
charged  for  such  collections,  and  also  regarding  enforce- 
ment of  the  provisions  hereof. 

"  Section  i.  These  rules  and  regulations  shall  apply  to 
all  members  of  the  association,  and  to  all  banks,  trust 
companies,  or  others  clearing  through  such  members. 
The  parties  to  which  the  same  so  apply  are  hereinafter 
described  as  collecting  banks. 

"  Section  2.  For  items  collected  for  the  accounts  of, 
or  in  dealings  with  the  governments  of  the  United  States, 
the  State  of  New  York,  or  the  city  of  New  York,  and  for 
items  payable  in  the  cities  of  Boston,  Mass. ;  Providence, 
R.  I.;  Albany,  N.  Y.;  Troy,  N.  Y.;  Jersey  City,  N.  J.; 
Bayonne,  N.  J.;  Hoboken,  N.  J.;  Newark,  N.  J.;  Phila- 
delphia, Pa.;  Baltimore,  Md.,  the  charge  shall  in  all 
cases  be  discretionary  with  the  collecting  bank,  and  the 
same  shall  not  be  governed  by  the  provisions  of  these 
rules  and  regulations. 

''  Section  3.  For  all  items  from  whomsoever  received 
(except  on  those  points  declared  discretionary  in  Section 
2),  payable  at  points  in  Connecticut,  Delaware,  District 
of  Columbia,  Indiana,  Illinois,  Kentucky,  Maine,  Mary- 
land, Massachusetts,  Michigan,  Missouri,  New  Hamp- 
shire, New  Jersey,  New  York,  Ohio,  Pennsylvania, 
Rhode  Island,  Vermont,  Virginia,  West  Virginia,  and 


1 70  CLEARING-HOUSES 

Wisconsin,  the  collecting  banks  shall  charge  not  less 
than  one-tenth  of  one  per  cent,  of  the  amount  of  the  items 
respectively. 

''  Section  4.  For  all  items  from  whomsoever  received 
payable  at  points  in  Alabama,  Arizona,  Arkansas,  Cali- 
fornia, Colorado,  Florida,  Georgia,  Idaho,  Indian  Terri- 
tory, Iowa,  Kansas,  Louisiana,  Minnesota,  Mississippi, 
Montana,  Nebraska,  Nevada,  New  Mexico,  North  Caro- 
lina, North  Dakota,  Oklahoma,  Oregon,  South  Carolina, 
South  Dakota,  Tennessee,  Texas,  Utah,  Washington, 
Wyoming,  and  Canada,  the  collecting  banks  shall  charge 
not  less  than  one-quarter  of  one  per  cent,  of  the  amount 
of  the  items  respectively. 

"  Section  5.  In  case  the  charge  upon  any  item  at  the 
rates  above  specified  does  not  equal  ten  cents,  the  col- 
lecting bank  shall  charge  not  less  than  that  sum;  but  all 
items  received  from  any  one  person  at  the  same  time  and 
payable  at  the  same  place  may  be  added  together  and 
treated  as  one  item  for  the  purpose  of  fixing  the  amount 
chargeable. 

"  Section  6.  The  charges  herein  specified  shall  in  all 
cases  be  collected  at  the  time  of  deposit  or  not  later  than 
the  tenth  day  of  the  following  calendar  month.  No  col- 
lecting bank  shall,  directly  or  indirectly,  allow  any  abate- 
ment, rebate,  or  return  for  or  on  account  of  such  charges 
or  make  in  any  form,  whether  of  interest  on  balances  or 
otherwise,  any  compensation  therefor. 

"  Section  7.  Every  collecting  bank,  trust  company,  or 
other  corporation  not  a  member  of  the  association,  but 
clearing  through  a  member  thereof,  shall  forthwith  adopt 
by  its  board  of  directors  a  resolution  in  the  following 


THE   NEW   YORK   CLEARING-HOUSE  171 

terms,  and  file  a  certified  copy  thereof  with  the  associa- 
tion as  evidence  as  therein  specified : 

"  Whereas,  This  corporation  has  acquired  the  privi- 
lege of  clearing  and  making  exchange  of  its  checks 
through  the  New  York  Clearing-house  Association,  and 
is  subject  to  its  rules  and  regulations:  Now,  therefore, 
Be  it  Resolved  that  this  corporation  hereby  in  all  respects 
assents  to  and  agrees  to  be  bound  by  and  to  comply  with 
all  rules  and  regulations  regarding  collections  outside  of 
the  City  of  New  York,  which  may  be  established  pursu- 
ant to  the  Constitution  of  said  Association,  and  that  the 
President  of  this  corporation  is  hereby  instructed  to  file 
a  certified  copy  of  this  resolution  with  the  Clearing- 
house Association  as  evidence  of  such  assent  and  agree- 
ment on  the  part  of  this  corporation. 

"  Section  8.  In  case  any  member  of  the  association 
shall  learn  that  these  rules  and  regulations  have  been  vio- 
lated by  any  of  the  collecting  banks,  it  shall  immediately 
report  the  facts  to  the  chairman  of  the  clearing-house 
committee,  or,  in  his  absence,  to  the  manager  of  the  asso- 
ciation. Upon  receiving  information  from  any  source 
that  there  has  been  a  violation  of  the  same,  said  chair- 
man, or,  in  his  absence,  said  manager,  shall  call  a  meeting 
of  the  committee.  The  committee  shall  investigate  the 
facts  and  determine  whether  a  formal  hearing  is  neces- 
sary. In  case  the  committee  so  concludes,  it  shall  in- 
struct the  manager  to  formulate  charges  and  present 
them  to  the  committee.  A  copy  of  the  charges,  together 
with  written  notice  of  the  time  and  place  fixed  for  hear- 
ing regarding  the  same,  shall  be  served  upon  the  collect- 
ing bank  charged  with  such  violation,  which  shall  have 


172  CLEARING-HOUSES 

the  right  at  the  hearing  to  introduce  such  relevant  evi- 
dence and  submit  such  argument  as  it  may  desire.  The 
committee  shall  hear  whatever  relevant  evidence  may  be 
offered  by  any  person  and  whatever  arguments  may  be 
submitted,  and  shall  determine  whether  the  charges  are 


1899. 

I  hereby  certify,  that,  at  a  meeting  of  the  Board  of  Direc- 
tors of 

of held 1899, 

the  following  preamble  and  resolution  were  adopted  : 

WhereaSy  This  corporation  has  acquired  the  privilege  of 
clearing  and  making  exchange  of  its  checks  through  the  New 
York  Clearing-house  Association,  and  is  subject  to  its  rules  and 
regulations  :  Now,  therefore.  Be  it  Resolved  that  this  corporation 
hereby  in  all  respects  assents  to  and  agrees  to  be  bound  by  and 
to  comply  with  all  rules  and  regulations  regarding  collections 
outside  of  the  City  of  New  York,  which  may  be  established  pur- 
suant to  the  Constitution  of  said  Association,  and  that  the  Presi- 
dent of  this  corporation  is  hereby  instructed  to  file  a  certified 
copy  of  this  resolution  with  the  Clearing-house  Association  as 
evidence  of  such  assent  and  agreement  on  the  part  of  this  cor- 
poration. 


[seal] 


Agreement  to  Comply  with  Rules  and  Regulations  Regarding  Collections 
Outside  of  New  York. 

sustained.  In  case  it  reaches  the  conclusion  that  they 
are,  the  committee  shall  call  a  special  meeting  of  the 
association  and  report  thereto  the  facts  with  its  conclu- 
sions. If  the  report  of  the  committee  is  approved  by  the 
association,  the  collecting  bank  charged  with  such  viola- 
tion shall  pay  to  the  association  the  sum  of  five  thousand 


THE   NEW   YORK   CLEARING-HOUSE  173 

dollars,  and  in  case  of  a  second  violation  of  these  rules 
and  regulations,  any  collecting  bank  may  also  in  the  dis- 
cretion of  the  association  be  excluded  from  using  its 
privileges  directly  or  indirectly,  and,  if  it  is  a  member, 
expelled  from  the  association." 

By  resolution  of  the  clearing-house  committee,  the 
foregoing  resolutions  went  into  effect  on  the  3d  day  of 
April,  1899. 

Most  complete  and  accurate  records  are  kept  at  the 
New  York  Clearing-house  of  all  the  transactions,  both 
of  the  exchanges  between  the  banks  and  of  all  the  im- 
portant acts  relating  to  the  administration.  Six  per- 
manent employees,  subordinate  to  the  manager  and 
assistant  manager,  are  required  to  perform  these  duties, 
the  attention  of  the  latter  two  being  almost  wholly  occu- 
pied in  work  of  an  administrative  character. 

There  are  about  twenty-five  records,  consisting  of 
ledgers,  statements,  books,  and  registers.  The  most 
important  are  as  follows:  A  record  book  containing  a 
copy  of  the  manager's  proof-sheet,  showing  the  daily 
exchanges  and  balances  of  the  several  banks  and  the 
totals  of  the  same;  a  ledger  showing  the  exchanges  and 
balances  of  each  bank  kept  separately,  the  same  being  a 
compilation  from  the  proof-sheet;  a  registry  book  show- 
ing the  balances  received  at  the  clearing-house  each  day; 
a  record  of  the  kinds  and  amounts  of  money  received  in 
payments  of  balances  by  days,  months,  and  years  since 
1882;  a  weekly  statement  record  showing  the  weekly 
statements  required  from  members  for  publication;  the 
statements  made  in  response  to  the  call  of  the  Comp- 
troller of  the  Currency  and  the  State  Superintendent  of 


174  CLEARING-HOUSES 

Banks,  compiled  and  recorded  for  the  use  of  members  of 
the  association;  an  individual  weekly  bank-statement 
introduced  in  1892,  being  a  compilation  of  the  weekly 
statement  by  banks;  a  record  of  the  increase  and  de- 
crease in  the  items  called  for  in  the  weekly  statements; 
an  annual  record  of  comparative  statements  of  footings 
of  weekly  statements;  a  record  for  the  quarter  begun  in 
1892,  showing  the  resources,  liabilities,  dividends,  and 
sales  and  book  value  of  stock;  a  record  of  information, 
as  complete  as  possible,  regarding  all  the  banks  in  New 
York  City;  a  record  of  the  issue  of  clearing-house  cer- 
tificates upon  the  deposit  of  gold,  and  also  upon  the  de- 
posit of  collateral  security,  with  the  loan  committee 
when  in  session;  a  general  statement  of  fines  and  correc- 
tions of  clerks  since  1877;  a  record  of  the  returns,  as  far 
as  possible,  from  the  various  clearing-houses  of  the 
United  States. 

There  are  about  ten  other  records  of  less  importance, 
besides  the  usual  ledger,  journal,  and  cash-book,  in  which 
the  clearing-house  keeps  its  own  accounts  and  the  rec- 
ords of  the  proceedings  of  the  various  committees. 


CHAPTER   XII 

DAILY   ROUTINE   OF   THE    NEW   YORK   CLEARING- 
HOUSE 

The  Clearing- room— Clerks  and  Messengers — The  Manager's 
Part — How  the  Exchanges  are  Made — The  Cash  Balance 
Paid  In — The  Disbursements — Clearing-house  Gold  Deposi- 
tory— Restrictive  Indorsements — Pro  Rating  of  Expenses — 
Record  of  Fines — Table  of  Annual  Clearings — Table  of 
Average  Daily  Balances. 

The  clearing-room  of  the  New  York  Clearing-house 
is  a  beautiful  and  commodious  apartment,  sixty  feet 
square,  surmounted  by  a  dome  rising  twenty-five  feet 
above  the  walls.  Light  enters  through  the  glass  form- 
ing the  upper  part  of  the  dome,  and,  when  necessary, 
additional  illumination  is  secured  by  the  use  of  electric 
lights,  which  encircle  the  base  of  the  dome.  Four  rows 
of  desks  occupy  the  floor,  with  sufficient  space  between 
for  an  easy  movement  of  the  clerks  in  delivering  the  ex- 
changes. Each  member  has  its  own  numbered  desk, 
separated  from  the  one  on  the  right  and  left  by  net-work 
of  wire.  At  the  east  end  of  the  room  is  the  manager's 
gallery,  elevated  sufficiently  to  command  an  easy  view 
of  the  scene  of  operations.  It  is  made  accessible  in  front 
by  steps  and  in  the  rear  by  an  elevator. 

Each  business  day,  at  lo  o'clock,  the  exchanges  take 

175 


i;6  CLEARING-HOUSES 

place  between  the  banks.  About  fifteen  minutes  before 
the  hour  designated  the  clerks  begin  to  arrive.  For- 
merly it  was  the  custom  for  each  member  to  send  only 
two  clerks,  but  so  numerous  and  cumbersome  have  be- 
come the  exchanges  of  many  of  the  banks  that  it  is  now 
necessary  to  send  one  and  sometimes  two  extra  clerks 
to  assist  in  transporting  the  items  to  and  from  tl^e  clear- 
ing-house, and  in  delivering  the  packages. 

The  two  essential  representatives  of  each  bank  are  the 
"  delivery  clerk  "  and  the  "  settling  clerk."  The  former 
delivers  the  packages  brought,  and  the  latter  receives 
the  return  packages  from  the  messengers  of  the  other 
banks. 

Each  member  sends  its  items  for  the  other  banks  made 
out  separately  and  enclosed  in  envelopes,  with  the 
amounts  listed  on  the  "  exchange  slip  "  attached  to  the 
exterior.  On  their  arrival  at  the  house  the  settling  clerks 
furnish  the  proof  clerk,  sitting  at  his  desk  in  the  man- 
ager's gallery,  with  the  "  first  ticket,"  upon  which  is 
entered  the  "  amount  brought "  or  "  credit  exchange," 
and  which  the  latter  transcribes  on  the  clearing-house 
proof  under  the  head  of  "  Banks  Cr."  The  total  of  the 
amounts  thus  brought  by  the  several  clerks  constitutes 
the  right-hand  main  column  of  that  sheet.  If  each  mes- 
senger has  a  package  for  each  of  the  other  banks,  there 
are  four  thousand  and  thirty-two  in  all  to  be  delivered. 

As  a  fact,  in  all  other  respects  than  the  quantity  of 
packages,  this  is  the  number  of  transactions  between  the 
clerks,  for  it  is  found  in  practice  better  to  use  a  blank  slip 
than  to  omit  a  slip,  merely  because  there  is  no  amount  to 
put  upon  it.     This  plan  saves  doubt  and  unnecessary 


THE   NEW   YORK   CLEARING-HOUSE  177 

searching  when  looking  after  the  proof.  The  stationery 
used  by  each  of  the  several  banks  is  put  up  in  sets  in 
numerical  order,  and  this  is  a  reason  why  it  is  easier  to 
use  all  the  slips  than  to  discard  those  which  happen  to 
have  no  items.     Accordingly,  as  the  delivery  clerks  pass 


2d  Teller, 

No.  1. 

BANK  OF  NEW  YORK  NAT'L  BANKING  ASSOCIATION 

FROM  No.  61. 
THE    FOURTH    NATIONAL    BANK. 

1900 


Form  of  Exchange  Slip. 

the  desks,  as  is  described  farther  on,  it  is  the  rule  to  de- 
posit the  "  small  ticket  "  with  the  receiving  clerk  in  each 
case,  whether  there  is  a  package  corresponding  to  it  or 
not.  When  the  settling  clerks  come  to  make  their  sum- 
ming up,  first  checking  back  by  the  small  tickets,  they 


O                                                 22 

o 

t« 

•s              Oi 

^ 

4^                ^ 

3 

s 

x« 

^ 

0 

o 

s; 

«^ 

? 

CD 

CO 

: 

5: 

i 

»*i* 

;^ 

g 

1 

y 

1 

€ 

I 

0 

^ 

i 

i 

! 
I 

t 

(£ 

i 

-^ 

cd 

OD 

15 

c 

0 

".«-• 

CO 

2: 

f 

t: 

3 

0 

rH                                   U. 

CO                              ^ 

6                   'S 

S                   6 

^  •!*•?*  •fr  *|*  •!*  *^  •^  "f^  *f*  •^•f*  *f*  ^ 

THE   NEW   YORK   CLEARING-HOUSE  179 

find  that  the  blank  spaces  in  their  sheets  are  justified  by 
the  blank  tickets  of  corresponding  numbers,  and  are  in 
this  respect  assured  of  the  correctness  of  their  work. 

When  the  hand  of  the  clock  points  to  a  few  minutes 
before  10  the  manager  appears  in  his  gallery,  usually  sur- 
rounded by  a  group  of  visitors.  At  one  minute  before  10 
he  sounds  a  gong  as  a  signal  for  each  of  the  clerks  to 
station  himself  in  his  proper  place.  The  settling  clerks 
occupy  their  separate  desks  on  the  inside  of  the  counter, 


No.   1. 
BANK   OF  NEW  YORK 

NATIONAL  BANKINa  ASSOCIATION. 

From  No.  61 
Fourth  National  Bank. 


Fac-simile  of  "Small  Ticket"  Deposited  by  Messenger  with 
Settling  Clerk. 

while  the  delivery  clerks  form  on  the  outside  with  their 
exchanges  either  on  the  left  arm  or  carried  in  a  box  or 
case  of  some  light  material.  The  delivery  clerks  arrange 
themselves  in  the  consecutive  desk  order,  and  stand  ready 
for  delivery  as  they  pass  along  the  counter.  They  carry 
"  delivery  clerks'  receipts  "  containing  the  amounts  for 
each  bank  arranged  in  order,  upon  which  the  several 


1 80  CLEARING-HOUSES 

settling  clerks,  or  their  assistants,  give  receipts  for  the 
package  delivered. 

All  are  now  in  position  for  the  exchange.  The  man- 
ager calls  "  ready,"  and  promptly  at  10  o'clock  he  sounds 
the  gong  again  and  the  delivery  of  the  packages  begins. 
He  looks  down  upon  four  columns  of  young  men  moving 
simultaneously  like  a  military  company  in  step.  At  the 
start  each  advances  to  the  desk  in  front  where  his  first  de- 
livery is  to  be  made.  He  deposits  the  package  of  items 
and  also  the  receipt  slip  on  which  the  assistant  of  the  set- 
tling clerk  (or,  in  the  case  of  small  banks,  the  settling 
clerk  himself)  writes  his  initials  opposite  the  amount  of 
the  package  delivered  in  the  blank  space  provided  for 
that  purpose.  At  the  same  time,  in  an  opening  in  the 
desk  provided  for  that  purpose,  he  deposits  a  "small 
ticket  "  containing  the  amount  of  the  package.  If  cor- 
rect, it  must  agree  with  the  amount  listed  on  the  "  ex- 
change slip."  This  process  is  repeated  at  the  desk  of  all 
the  banks,  each  clerk  making  the  complete  circuit  in  ten 
minutes  to  the  point  from  which  he  started. 

Being  now  at  liberty,  each  delivery  clerk  takes  back 
to  his  bank  the  exchanges  deposited  by  the  other  mes- 
sengers, while  the  settling  clerks  remain  until  the  proof 
is  made. 

The  settling  clerks,  immediately  upon  the  completion 
of  the  exchange  of  packages,  sum  up,  as  quickly  as  possi- 
ble, the  amounts  entered  on  their  statements  under  the 
head  of  "  Banks  Dr."  Upon  ascertaining  the  total  they 
make  out  a  "  second  ticket,"  containing  the  credit  and 
debit  exchanges  and  the  balance,  and  send  the  same  to 
the  "  proof  clerk,"  who  transcribes  the  debit  exchange 


u 


No.  61.        THE  FOURTH  NATIONAL  BANK. 
E)clibcrp  Clerli'fi  Eeceiptg, jgoo 


No. 


BANKS. 

Bank  of  N.  Y.  Nat'l  Bk'g  Assoc'n. 
Bank  of  the  Manhattan  CcHnpany. 

Merchants'  National  Bank 

Mechanics*  National  Bank 

Bank  of  America 

Phenix  National  Bank , 

National  City  Bank 

Chemical  National  Bank , 

Merchants'  Exchange  Nat'l  Bank 
Gallatin  National  Bank 


DR. 

DR 

SIGNATURES. 


82 

83 
84 
85 
87 

88 
90 

91 
92 

93 
94 

Fifth  National  Bank 

82 
83 
84 
85 
87 
88 
90 

9» 
92 

93 
94 

Bank  of  the  Metropolis.        

West  Side  Bank  

W#»cf«»m  Nnfinnal  Bank 

First  National  Bank,  B'klyn 

N.  Y,  Produce  Exchange  Bank... . 

Astor  National  Bank 

1 

Form  of  Delivery  Clerk's  Receipts. 


No.  61.         THE  FOURTH  NATIONAL  BANK. 
S>cttlinff  CUxk'n  S>tatement, ipoo 


No. 


BANKS. 


Bank  of  N.  Y.  Nat'l  Bk'g  Assoc'n. 
Bank  of  the  Manhattan  Company. 

Merchants'  National  Bank 

Mechanics'  National  Bank 

Bank  of  America  

Phenix  National  Bank 

National  City  Bank 

Chemical  National  Bank 

Merchants'  Exchange  Nat'l  Bank. 

Gallatin   Naional  Bank 

Fifth  National  Bank 

Bank  of  the  Metropolis 

West  Side  Bank 

Seaboard  National  Bank 

Western  National  Bank , 

First  National  Bank,  B'klyn , 

National  Union  Bank 

Liberty  National  Bank , 

N.  Y.  Produce  Exchange  Bank. . . . 

Bank  of  New  Amsterdam 

Astor  National  Bank 


DEBIT. 


FOOTINGS. 


BALANCES 


DEBIT. 


CREDIT. 


3 

4 
6 

7 
8 

12 

13 
M 

82 

83 
84 

1 85 

1 87 

'  88 
90 

91 
92 

93 
94 


Form  of  Settling  Clerk's  Statement. 


1 84  CLEARING-HOUSES 

under  the  head  of  "  Banks  Dr."  (the  credit  exchange 
having  been  already  entered),  and  the  balance  on  the 
credit  or  debit  side,  as  the  case  may  require. 

While  this  is  being  done  the  settling  clerks  are  check- 
ing back  from  the  small  tickets  to  ascertain  whether  the 
amounts  agree  with  the  amounts  listed  on  their  state- 
ments from  the  exchange  slips.  By  this  time  the  proof 
clerk  has  footed  the  four  columns  on  his  sheet,  namely, 
the  debit  and  credit  exchanges  and  the  debit  and  credit 
balances.  If  the  former  two  agree  with  the  latter  two 
the  work  is  correct,  and  the  result  is  announced  by  the 
manager,  who  calls  ofif  credits  and  debits. 

As  he  calls  off  these  balances,  which  are  named  in 
thousands  of  dollars,  the  hundreds  and  fractional  parts 
being  omitted,  the  clerks  list  the  amounts  on  a  special 
slip  provided  for  the  purpose,  and  thereby  secure  a  gen- 
eral report  of  the  balances  of  the  day  to  take  back  with 
them  for  the  inspection  of  their  several  cashiers.  By 
these  reports  the  managers  of  the  several  banks  are  in- 
formed of  those  who  have  balances  to  be  paid  them  by 
the  clearing-house,  and  also  of  those  who  are  to  pay 
amounts  into  the  clearing-house. 

The  time  elapsed  since  the  manager  sounded  his  gong 
for  starting  the  work,  up  to  the  completion  of  the  proof, 
is  perhaps  forty-five  minutes,  or  possibly  a  little  more. 
Three-quarters  of  an  hour  is  the  limit,  before  fines  are 
in  order,  against  those  who  have  made  the  errors  that 
prolong  the  work;  but  it  is  not  often  that  it  becomes 
necessary  to  impose  fines.  The  record  time  is  thirty- 
five  minutes,  although  the  dates  when  the  proof  has  been 
reached  in  thirty-seven  to  forty  minutes  from  the  time 


S     ^ 


OS 

o 


f 


«^ 


"o 


•a 
g 


CO 

d 


GQ 


o 

I— 

<c 

h- 

QC 

o 


o 

o 


a 
o 

I 

3 

«> 
a 
C) 

•a 

a 


•6<9. 


pq 
o 

EH 

m 

EH 

p^ 
o 

a 

^3 


ItnP^tHTIHMTTTftTtMM  1  ?  t  t  n  ' «  ■  .  f  t  .  »  t  M  H  T  H  H  t  t  t  M  T  t  t  T  T  p  *  «  M  M  1 1  p  f 


1 86  CLEARIl^G-HOUSES 

the  delivery  clerks  started  on  their  rounds  are  numerous. 
When  a  particularly  good  showing  in  this  regard  has 
been  accomplished  the  announcement  of  the  result  by 
the  manager  is  very  likely  to  be  greeted  with  applause. 

But  suppose,  as  not  infrequently  happens,  there  is  a 
discrepancy.  The  proof-sheet  does  not  balance,  which 
clearly  indicates  that  there  is  an  error  in  the  work  of  one 
or  more  of  the  clerks.  The  manager  immediately  an- 
nounces the  difference  and  the  clerks  proceed  to  search 
for  it. 

Various  methods  are  resorted  to,  according  to  the 
nature  of  the  difference.  Usually  the  manager  calls  for 
an  exchange  of  sheets,  to  the  right  or  to  the  left,  for  ex- 
amination of  footings,  and  in  cases  of  apparent  error  in 
entry  the  amounts  are  called  back.  This  is  the  final 
method  of  revision,  and  if  the  additions  are  correct  it 
must  make  the  proof. 

Thus  far  no  money  has  entered  into  the  transaction. 
Checks,  notes,  drafts,  and  other  items  have  passed 
through  the  exchanges,  but  as  yet  no  occasion  has  arisen 
for  the  use  of  a  single  penny.  Evidently,  however,  the 
clearing  is  not  yet  complete.  Each  member  has  in  its 
possession  paper  drawn  upon  itself  which  the  other  mem- 
bers have  credited  on  their  books,  and  likewise  each 
member  has  given  in  exchange  to  each  of  the  other  mem- 
bers the  paper  drawn  upon  them  respectively  and  which 
it  has  credited  upon  its  own  books.  But  the  possibility 
is  very  remote  that  the  amounts  of  the  items  delivered 
by  any  member  to  the  other  banks  will  exactly  balance 
the  sum-total  of  the  items  received  from  them.  Indeed, 
so  slight  is  the  chance  of  such  an  agreement,  that  in  the 


o 

o 


Mro-«-vOt^00ONfO 


O         N         fO        •♦        O 

M  M  M  X  OV 


0\      o^      o*      o* 


o 

o 

a. 
m 

00 

ID 

o 

X 

6 

z 

< 

-J 

U 
:::^ 

o 


6 

Q 


c      c 


^    z   z 


■s  a 


i2     2 


CQ     S     S     PQ     Oh     2i     H 


S     6     Z 


55      2 


o      ■♦     »o       tN 


UNIVi-.RSTTY 


1 88  CLEARING-HOUSES 

whole  history  of  the  association  there  has  not  been  a 
single  instance  of  this  kind,  although,  as  we  shall  see,  the 
approach  on  one  occasion  was  within  one  cent  of  an 
exact  exchange.  Hence,  each  day  after  the  exchange 
the  general  proof  will  show  a  debit  on  the  part  of  some 
banks  and  a  corresponding  credit  on  the  part  of  others. 
To  complete  the  clearings,  therefore,  it  is  necessary  for 
the  banks  to  settle  these  balances. 

Accordingly,  before  half-past  i  o'clock  each  debtor 
bank,  in  compliance  with  the  requirement  of  the  consti- 
tution, pays  into  the  clearing-house  the  amount  of  its 
debit  balance  and  obtains  a  receipt  for  the  same,  signed 
by  the  assistant  manager.  After  half-past  i  o'clock  the 
creditor  banks  receive  at  the  clearing-house  their  respec- 
tive balances  and  give  their  receipt  for  the  same  in  a  book 
provided  for  that  purpose;  but  in  no  case  can  a  creditor 
bank  receive  its  balance  until  all  the  debtor  banks  have 
paid  in. 

With  the  exception  of  fractional  amounts,  balances  are 
settled  with  legal  tender  notes,  gold  coin.  United  States 
and  clearing-house  gold  certificates.  All  money  is  paid 
to  the  clearing-house  in  packages  made  up  in  amounts 
of  one  thousand  dollars,  two  thousand  dollars,  three  thou- 
sand dollars,  four  thousand  dollars,  five  thousand  dollars, 
ten  thousand  dollars,  twenty  thousand  dollars,  fifty 
thousand  dollars,  and  one  hundred  thousand  dollars,  and 
sealed  with  five  seals  having  the  bank's  name  or  symbol 
thereon,  also  the  amount  in  figures  and  in  words,  the 
date,  the  kind  of  money,  as  "  legal  tenders,"  "  treasury 
notes,"  "  gold,"  etc.,  plainly  written  or  printed  on  each 
package.     No  package  of  over  five  thousand  dollars,  ex- 


No. 


BANKS. 


Bank  of  N.  Y.  Nat'l  Bk'g  Assoc'n, 
Bank  of  the  Manhattan  Company, 
Merchants'  National  Bank, 
Mechanics'  National  Bank, 

Bank  of  America, 

Phenix  National  Bank,  .  .  . 
National  City  Bank,  .... 
First  National  Bank,  B'klyn,  . 
National  Union  Bank,  .  .  . 
Liberty  National  Bank,  .  .  . 
N.  Y.  Produce  Exchange  Bank, 
Bank  of  New  Amsterdam,  .  . 
Astor  National  Bank,      .    .     . 


Exchanges, 


Balances,  . 


Dr. 


1900 


Cr. 


Form  of  Settling  Clerk's  Report  to  His  Bank  of  Daily  Balances. 


igo  CLEARING-HOUSES 

cept  the  twenty-thousand-dollar  packages,  contains  more 
than  one  hundred  bills;  the  twenty-thousand-dollar  pack- 
ages may  contain  two  hundred  one-hundred-dollar  bills. 
Packages  containing  legal  tender  notes  are  made  up  in 
amounts  of  one  thousand  dollars,  two  thousand  dollars, 
three  thousand  dollars,  four  thousand  dollars,  five  thou- 
sand dollars,  ten  thousand  dollars,  and  twenty  thousand 
dollars  each,  and  all  notes  of  a  smaller  denomination  than 
five  hundred  dollars  are  put  up  in  packages  of  not  over 
five  thousand  dollars  each.  Unless  it  is  necessary  to  ob- 
tain change,  packages  are  never  broken  at  the  clearing- 
house, but  are  paid  out  as  received. 

By  virtue  of  their  convenience  and  safety,  the  clearing- 
house certificates,  elsewhere  referred  to,  are  now  used  ex- 
tensively in  the  liquidation  of  balances.  These  are  of  two 
kinds — those  issued  upon  the  deposit  of  gold  coin  in  the 
clearing-house  vaults,  and  those  issued  upon  the  depositr 
of  gold  coin  with  the  assistant  treasurer  of  the  United 
States.  Such  certificates  are  issued  in  denominations  of 
five  thousand  dollars  and  ten  thousand  dollars,  corre- 
sponding to  the  full  par  value  of  the  gold  deposited,  and 
are  made  negotiable  only  among  the  associated  banks  by 
indorsement  on  the  back. 

The  holders  of  these  certificates  are  the  absolute  own- 
ers of  the  gold  represented  by  them,  and  are  at  liberty 
to  redeem  the  same  at  any  time  during  banking  hours. 
It  is  entirely  optional  with  the  members  to  make  such 
deposits  or  not.  They  act  according  to  their  pleasure; 
but  any  member  holding  such  certificates  and  trans- 
ferring the  same  to  any  party  not  a  member,  is  subject  to 
a  fine  of  one  hundred  dollars  for  each  offence. 


1 


b 


O               i              : 

^ 

o 

'^ 

Ob 

'S^ 

>-H 

5i 

« 

~i     ^ 

M 

- 

el  1 

<J                R 

>i 

1 

.2 

A      hJ 

U                                ! 

t3)       " 

'Q 

^            1 

"5 

W     H 

^ 

e  S 

^    5 

S                     i 

i  •: 

^  -1 

g 

*^ 

< 

^ 

>> 

iH         S 

CO       5 

^o 

^ 

!z     1 

a)oL 

1^0. 


Registered  at  the 

NEW  YORK  CLEARING-HOUSE, 

New  York, 1898. 

Pay  only  to  any  Bank  member  of  the  Neiv 
York  Clearing-house  Association* 


ca 


Resolution  Adopted  October  2,  i860. 

Any  member  of  the  Clearing-house  Associa- 
tion who  shall  pay  or  deliver  to  any  party,  other 
than  a  member  of  the  said  Association,  the  certifi- 
cate of  deposit  of  the  Clearing-house  Depository, 
shall  be  subject  to  a  fine  of  $ioo  (one  hundred 
dollars). 


194  CLEARING-HOUSES 

The  Bank  of  America  was  originally  constituted  a 
common  coin  depository,  to  hold  in  special  trust  and 
to  issue  certificates  in  denominations  of  one  thousand 
dollars,  five  thousand  dollars,  and  ten  thousand  dollars 
upon  the  deposit  of  such  gold  coin  as  the  other  banks 
might  place  therein. 

The  clearing-house  has  been  its  own  depository  since 
its  removal  to  the  new  location.  Sometimes,  when  gold 
coin  is  in  demand  or  there  is  a  stringency  in  the  money 
market,  the  coin  is  withdrawn  from  the  depository  by 
presentation  of  these  certificates  in  considerable  amounts. 
At  other  times  the  coin  is  freely  deposited. 

A  careful  record  is  kept  at  the  clearing-house  of  the 
amounts  of  money  and  certificates  used  in  the  settlement 
of  balances.  Some  idea  of  the  relative  proportion  of  the 
various  kinds  of  money  and  certificates  employed  may 
be  gained  from  the  record  for  the  year  ending  September 
30,  1899.    The  debit  balances  paid  in  were  as  follows: 

U.  S.  gold  coin $233,309,000.00 

U.  S.  bearer  gold  certificates 3,386,000.00 

U.  S.  order  gold  certificates 750,000.00 

Clearing-house  gold  certificates 2,824,210,000.00 

U.  S.  legal  tender  and  change 24,316,370.53 

Total $3,085,971,370.53 

The  course  pursued  by  the  manager  in  the  event  of 
failure  on  the  part  of  any  member  to  appear  at  the  proper 
hour  to  pay  the  balance  against  it  differs  somewhat  from 
that  pursued  in  many  other  associations.  Section  16  of 
the  constitution  provides  that  in  such  an  emergency  the 


THE   NEW    YORK   CLEARING-HOUSE 


195 


"  several  banks  exchanging  at  the  clearing-house  with 
the  defaulting  bank  shall  immediately  furnish  the  man- 
ager the  amount  of  that  balance  in  proportion  to  their 
respective  balances  against  that  bank  resulting  from  the 
exchanges  of  the  day,  and  the  manager  shall  make  req- 
uisition accordingly,  so  that  the  general  settlement  may 
be  accompHshed  with  as  little  delay  as  possible.  The 
respective  amounts  so  furnished  the  clearing-house  on 
account  of  the  defaulting  bank  will,  of  course,  constitute 
claims  on  the  part  of  the  several  responding  banks 
against  that  bank." 

Thus  it  will  be  observed  that  they  shall  "  immediately 
furnish  the  manager  the  amount  of  that  balance  in  pro- 
portion to  their  respective  balances  "  against  the  default- 
ing bank.  Most  clearing-houses  in  a  similar  exigency 
require  that  a  defaulting  member  shall  deliver  to  the 
manager  all  the  checks  received  through  the  clearing- 
house on  the  day  of  default,  and  that  the  latter  shall 
return  the  same  to  the  members  clearing  them.  Sim- 
ilarly, all  the  members  receiving  checks  from  the  de- 
faulting member  on  that  day  are  required  to  surrender 
the  same  to  said  defaulting  member,  after  which  the 
clearing  of  the  day  is  readjusted  and  a  new  settlement 
made,  the  same  as  if  no  items  had  been  sent  through  by 
or  on  the  defaulting  member.  There  have  been  cases, 
however,  where  the  insolvency  of  a  bank  was  known  be- 
fore clearing  hour,  whereupon  the  clearing-house  com- 
mittee has  declined  to  allow  it  to  clear. 

The  association  is  in  no  way  responsible  for  the  bal- 
ances, except  in  so  far  as  they  are  actually  paid  into  the 
hands  of  the  manager,   and   then   its  responsibility   is 


196  CLEARING-HOUSES 

Strictly  limited  to  the  faithful  distribution  by  him  among 
the  creditor  banks  of  the  amounts  which  he  has  received. 
Should  any  losses  occur  while  the  balances  are  in  his 
custody,  the  associated  banks  must  bear  the  same  in  pro- 
portion to  the  other  expenses.  Any  error  in  the  ex- 
changes and  claims  arising  from  the  return  of  checks,  or 
from  any  other  cause,  are  adjusted  directly  between  the 
banks  concerned. 

The  association  is  free  from  responsibility  for  the  con- 
tents of  sealed  bags  or  packages  received  at  the  clearing- 
house, and  all  reclamations  for  errors  or  deficiencies  in 
the  contents  of  said  sealed  bags  or  packages  must  be 
made  by  i  o'clock  on  the  following  day  by  the  receiving 
bank  directly  against  the  bank  whose  mark  the  sealed 
bag  or  package  bears.  "  All  checks,  drafts,  notes,  or 
other  items  in  the  exchanges,  returned  as  not  good  or 
missent,  must  be  returned  the  same  day  directly  to  the 
bank  from  which  they  were  received,  and  the  said  bank 
must  immediately  refund  to  the  bank  returning  the  same 
the  amount  which  it  had  received  through  the  clearing- 
house for  the  said  checks,  drafts,  notes,  or  other  items 
so  returned  to  it  in  specie  or  legal  tender  notes.  But 
checks,  drafts,  notes,  or  other  items  to  be  returned  for 
informality  of  indorsement  may,  after  being  certified  by 
the  bank  returning  it,  be  returned  through  the  exchanges 
the  following  morning,  not  exceeding  five  thousand  dol- 
lars in  amount  to  any  one  bank." 

An  amendment  to  this  section  was  made  on  June  4, 
1884,  providing  that  in  case  of  the  refusal  or  inability  of 
any  bank  to  refund  promptly  to  the  bank  presenting 
items  not  good,  the  bank  holding  them  may  report  the 


THE   NEW   YORK   CLEARING-HOUSE  197 

amount  of  the  same  to  the  manager,  whose  duty  it  shall 
be,  with  the  approval  of  the  clearing-house  committee, 
to  take  from  the  settling  sheet  of  both  banks  the  amount 
of  such  items  and  readjust  the  clearing-house  statement 
and  declare  the  correct  balance,  in  conformity  with  the 
change  so  made,  provided  such  report  is  given  to  the 
manager  before  i  o'clock  of  the  same  day. 

All  checks  and  notes,  drafts,  and  bills  of  exchange, 
when  certified  by  the  banks  on  the  previous  day,  are 
proper  clearing  matter.  Also  for  the  convenience  of 
members,  various  kinds  of  money  orders,  though  not 
authorized  by  the  association,  are  accepted  through  the 
exchanges.  Clearing  items  with  restricted  indorse- 
ments is  prohibited  by  a  resolution  adopted  June  4,  1896, 
as  follows : 

"  Resolved,  That  on  and  after  the  first  day  of  July,  1896, 
members  of  this  association  shall  not  send  through  the 
exchanges  any  checks,  sight  drafts,  notes,  bills  of  ex- 
change, or  other  items  having  thereon  any  qualified  or 
restrictive  indorsements,  such  as  '  for  collection  '  or  '  for 
account  of,'  unless  all  indorsements  thereon  are  guaran- 
teed by  the  bank,  member  of  the  association,  sending 
such  checks,  drafts,  notes,  bills  of  exchange,  or  other 
item.  Any  such  items  sent  in  violation  of  the  above 
requirements  shall  be  returned  directly  to  the  member 
from  which  they  were  received,  and  shall  in  all  respects 
be  subject  to  the  regulations  contained  in  Section  15  of 
the  constitution  of  the  New  York  Clearing-house  Asso- 
ciation." 

In  response  to  many  inquiries  as  to  what  indorsements 
are  considered  restrictive  or  qualified  under  the  above 


198  CLEARING-HOUSES 

resolution,  the  clearing-house  committee  replied  that 
though  in  its  opinion  the  forms  "  For  Deposit  "  and 
''  For  Deposit  to  the  Credit  of "  do  not  fall  under  the 
class  of  indorsements  within  the  purview  of  the  clearing- 
house resolution,  they  are  to  a  certain  extent  considered 
restrictive  when  followed  by  other  indorsers,  and  that  in- 
asmuch as  the  clearing-houses  of  several  other  cities  have 
decided  not  to  accept  the  indorsements  ''  For  Deposit " 
or  '*  For  Deposit  to  the  Credit  of,"  and  decline  to  pay  any 
item  with  other  than  a  plain  indorsement  thereon,  mem- 
bers of  the  association  should  request  their  correspond- 
ents and  depositors  to  use  the  following  form :     "  Pay 

Bank  or  order,"  which,  if  used,  would  prevent 

delay  and  possible  loss  in  the  collection  of  checks  and 
other  items. 

The  expenses  of  the  association  have  not  always  been 
borne  by  the  members  in  the  same  proportion.  Section 
22  of  the  constitution,  as  originally  adopted  June  6,  1854, 
is  as  follows :  "  The  expenses  of  the  clearing-house,  not 
including  the  expense  of  printing  for  the  several  banks 
(which  last-mentioned  expense  shall  be  apportioned 
equally),  shall  be  borne  and  paid  by  the  several  banks 
belonging  to  the  association,  according  to  their  respec- 
tive capitals,  as  follows:  Banks  having  capitals  of  less 
than  five  hundred  thousand  dollars  shall  pay  one  hundred 
dollars  each  annually.  Banks  having  capitals  of  less 
than  one  million  dollars,  and  not  less  than  five  hundred 
thousand  dollars,  shall  pay  two  hundred  dollars  each 
annually.  Banks  having  capitals  of  one  million  dollars 
and  over  shall  pay  three  hundred  dollars  each  annually. 
And  in  the  same  proportion  if  more  funds  are  necessary.'* 


THE   NEW   YORK   CLEARING-HOUSE  199 

In  1864  the  constitution  was  referred  to  a  committee  of 
five  members  for  amendment  and  revision.  In  due  time 
they  reported  the  changes  they  had  made,  and  on  Janu- 
ary 24,  1865,  the  constitution  was  adopted  as  amended. 
It  appears  that  prior  to  that  time  the  above  section  was 
in  force,  requiring  that  members  be  assessed  for  ex- 
penses in  proportion  to  capital,  but  that  the  change  es- 
sentially to  the  present  plan  was  then  introduced. 

Prior  to  1890  no  charge  was  made  upon  non-mem- 
bers clearing,  but  on  October  14th  of  that  year  a  reso- 
lution was  passed,  fixing  an  annual  assessment  of  two 
hundred  dollars  upon  each  non-member.  On  Decem- 
ber 21,  1896,  an  amendment  was  made  to  this  resolution, 
changing  such  assessment  to  five  hundred  dollars  in- 
stead of  two  hundred  dollars.  Original  members  paid 
no  admission  fee. 

Since  the  revision  of  1865  the  printing  expenses  have 
been  divided  equally,  and  each  bank  has  paid  an  annual 
assessment  of  two  hundred  dollars,  and,  in  addition,  its 
portion  of  any  further  sum  necessary  rated  on  the 
amount  of  exchanges  which  it  has  brought  to  the  clear- 
ing-house during  the  preceding  year.  These  proportions 
are  made  out  from  the  records  at  the  clearing-house, 
after  deducting  the  fixed  annual  assessment  upon  non- 
members  and  members,  any  fees  that  may  have  accrued 
from  the  admission  of  members,  and  rents  due  the  asso- 
ciation. 

There  is  another  important  feature  entering  into  the 
element  of  expenses  which  must  not  be  overlooked.  In 
associations  where  the  clearing-house  is  rented  property, 
it  is  comparatively  easy,  in  fixing  upon  newly  elected 


2CX)  CLEARING-HOUSES 

members  their  proportionate  share  of  the  current  ex- 
penses, to  do  justice  to  all  concerned.  But  in  New  York 
the  situation  is  unique.  The  association  owns  its  own 
clearing-house,  for  erection  of  which  a  heavy  draft  was 
made  upon  the  members.  Clearly,  therefore,  banks  sub- 
sequently joining  should  in  some  way  render  to  the  other 
members  a  just  compensation  for  the  privileges  they 
acquire. 

Such  compensation  is  duly  provided  for  in  the  follow- 
ing plan:  Preliminary  to  the  erection  of  a  clearing- 
house nine  thousand  shares  were  issued — eight  thousand 
nine  hundred  and  seventy-five  in  the  name  of  the  presi- 
dent of  the  Clearing-house  Association  and  twenty-five 
in  the  names  of  the  five  directors  of  the  Clearing-house 
Building  Company,  who  held  the  same  in  trust.  Certifi- 
cates to  the  value  of  the  shares  were  then  issued  to  the 
banks  in  proportion  to  their  respective  capitals  and  sur- 
plus, and  they  in  turn  advanced  the  money  for  the  erec- 
tion of  the  clearing-house.  Each  bank  advanced  an 
amount  of  money  equal  to  the  face  value  of  the  certifi- 
cates it  held.  This  was  done  under  an  agreement  that  it 
should  receive  a  stipulated  rate  of  interest  on  its  certifi- 
cates, such  interest  to  be  raised  by, assessments  upon  the 
members  according  to  capital.  These  certificates  are 
not  transferrable  so  long  as  the  holder  is  a  member  of 
the  association,  but  if  at  any  time  it  should  cease  to  be  a 
member  the  association  is  given  the  preference  in  their 
purchase. 

The  fines  collected  are  applied  to  the  reduction  of  the 
expenses.  The  following  table,  showing  the  amounts  of 
fines  for  each  year  from  1885  to  1899,  will  be  of  interest: 


THE   NEW   YORK   CLEARING-HOUSE  201 

1885  Amount  of  fines  collected     $1,015 


1886 

n 

ti 

1,002 

1887 

it 

a 

1,422 

1888 

n 

ii 

1,398 

1889 

(( 

a 

1,121 

1890 

it 

ii 

1,046 

I89I 

ii 

it 

885 

1892 

a 

it 

749 

1893 

a 

it 

989 

1894 

a 

it 

538 

1895 

a 

it 

521 

1896 

ii 

it 

535 

1897 

(( 

it 

542 

1898 

it 

it 

407 

1899 

(( 

it 

562 

The  maximum  for  this  period,  one  thousand  four  hun- 
dred and  twenty-two  dollars,  which  is  also  the  maximum 
for  the  whole  history  of  the  clearing-house,  was  attained 
in  1887,  and  the  minimum  in  1898.  The  decHne  has 
been  nearly  uniform  since  1887.  The  gradual  falling  off 
from  year  to  year  has  been  due,  in  the  main,  to  improve- 
ment in  the  discipline,  and  greater  care  and  efficiency  on 
the  part  of  the  clerks. 

The  following  gives  the  scale  of  fines  in  force  at  the 
clearing-house : 

Forty-five  minutes  from  the  hour  of  commencing — 
vis.,  10  o'clock — will  be  allowed  for  a  proof.  For  all 
errors  remaining  undiscovered  at  11. 15  o'clock  the  fines 
will  be  doubled,  and  at  12  o'clock  quadrupled. 


202  CLEARING-HOUSES 

statement  (i.e.,  in  the  amount  brought),  whether  of  foot- 
ing or  entry,  and  all  errors  causing  disagreement  be- 
tween the  credit  entries,  the  check  tickets,  and  the  ex- 
change slips,  each  three  dollars. 

2.  Errors  in  making  the  debit  (i.e.,  amount  received) 
entries,  each  two  dollars. 

3.  Errors  in  the  tickets  reported  to  the  clearing-house, 
causing  disagreement  between  the  balances  and  aggre- 
gate, each  two  dollars. 

4.  Errors  in  footing  the  amount  received,  one  dollar. 

5.  Disorderly  conduct  of  clerk  or  delivery  clerk  at  the 
clearing-house  or  disregard  of  the  manager's  instruc- 
tions, each  offence,  two  dollars. 

6.  Clerk  or  delivery  clerk  failing  to  attend  punctually 
with  statements  and  tickets  complete,  at  the  morning 
exchanges,  each  two  dollars. 

7.  Debtor  banks  failing  to  appear  to  pay  their  bal- 
ances before  1.30  o'clock,  three  dollars. 

8.  Errors  in  delivery  or  receipt  of  exchanges,  each  one 
dollar. 

It  remains  in  this  connection  to  give  a  table  of  figures 
showing  the  clearings  for  each  year,  from  the  establish- 
ment of  the  clearing-house  in  1853  to  the  present  time; 
also  the  balances  for  the  same  period,  with  other  impor- 
tant statistics: 


I 


CLEARINGS  FOR  46  YEARS. 

Fitoal 

years 

ending 

Sept.  30 

No.  OF 
MEMBERS 

CLEABINOS  FOB  7EAB 

9 

AV^BAQE  SAIL? 
CLEABIMGS 

1854 

50 

$5,750,455,987-06 

$19,104,504.94 

1855 

48 

5,362,912,098.38 

17,412,052.27 

1856. 

50 

6,906,213,328.47 

22,278,107.51 

1857 

50 

8,333,226,718.06 

26,968,371.26 

1858 

46 

4,756,664,386.09 

15.393,735-88 

1859 

47 

6,448,005,956.01 

20,867,333.19 

i860 

50 

7,231,143,056.69 

23.401,757.47 

1861 

SO 

5,915,742,758.05 

19,269,520.38 

1862 

50 

6,871,443,591.20 

22,237,681.53 

1863 

50 

14,867,597,848.60 

48,428,657.49 

1864 

49 

24,097,196,655.92 

77,984,455.20 

1865 

55 

26,032,384,341.89 

84,796,040.20 

1866 

58 

28,717,146,914.09 

93.541,195-16 

1867 

58 

28,675,159,472.20 

93,101,167.11 

1868 

59 

28,484,288,636.92 

92,182,163.87 

1869 

59 

37,407,028,986.55 

121,451,302.81 

1870 

61 

27,804,539.405-75 

90,274.478.59 

1871 

62 

29,300,986,682.21 

95.133.073-64 

1872 

61 

33,844,369.568.39 

109,884,316.78 

1873 

59 

35,461,052,825.70 

115,885,793.58 

1874 

59 

22,855,927,636.26 

74,692,573.97 

1875 

59 

25,061,237,902.09 

81,899,470.26 

1876 

59 

21,597,274,247.04 

70,349,427.51 

1877 

58 

23,289,243,701.09 

76,358,176.06 

1878 

57 

22,508,438,441.75 

73.785.746.54 

1879 

59 

25,178,770,690.50 

182,015,539.70 

1880 

59 

37,182,128,621.09 

121,510,224.25 

1881 

61 

48,565,818,212.31 

159,232,190.86 

1882 

62 

46,552,846,161.34 

151,637.935-38 

1883 

64 

40,293,165,257.65 

132,543,306.76 

1884 

62 

34,092,037,337.78 

11,048,981.55 

1885 

64 

25,250,791,439.90 

82,789,480.38 

1886 

64 

33,374.682,216.48 

109,067,588.94 

1887 

65 

34,872,848,785.90 

114,337,209.13 

1888 

64 

30,863,686,609.21 

101,192,415.11 

1889 

64 

34,796.465,528.87 

114,839,820.23 

1890 

65 

37,660,686,571.76 

123,074,139.12 

1 891 

64 

34.053,698,770.04 

111,651,471-39 

1892 

65 

36,279,905,235.59 

118,561,781.82 

1893 

65 

34,421,380,869.50 

113,978,082.31 

1894 

66 

24,230,145,367.70 

79,704,425-55 

1895 

67 

28,264,379,126.23 

92,670,095.49 

1896 

66 

29,350.804,883.87 

96,232,442.24 

1897 

66 

31.337.760,947-98 

103,424,953.62 

1898 

65 

39,853,413.947-74 

131,529,418.97 

1899 

64 

57.368,230,771.33 

189,961,029.04 

To 

tals.    i 

>1. 231, 423.41 8,499.23 

$87,415,590.26 

Reproduction  of  a  Table  Issued  by  the  New  York  Clearing-house. 


204  •  CLEARING-HOUSES 

One  trillion  two  hundred  and  thirty-one  billion  four 
hundred  and  twenty-three  million  four  hundred  and 
eighteen  thousand  four  hundred  and  ninety-nine  dollars 
and  twenty-three  cents!  It  is  difficult  to  comprehend 
the  magnitude  of  such  a  sum.  This  is  more  than  suffi- 
cient to  run  the  whole  machinery  of  our  Government 
for  two  thousand  years,  and  is  one  hundred  and  thirty- 
five  times  as  much  as  all  the  gold  and  silver  money  in  the 
world.  If  put  up  in  eight-ounce  duck  bags  in  the  form 
of  silver  dollars,  it  would  require  ten  million  two  hundred 
and  eleven  thousand  seven  hundred  and  three  cubic  yards 
of  space  for  storage;  and  to  count  it  all  in  a  single  year,  it 
would  take  twelve  thousand  men,  counting  at  the  rate  of 
one  hundred  and  seventy-five  dollars  a  minute,  day  and 
night,  without  intermission. 

These  figures  distance  the  transactions  of  all  the  other 
clearing-houses  of  the  United  States  combined,  whether 
we  consider  the  sum-total  of  the  exchanges  since  the 
inauguration  of  our  clearing  system  or  the  current  trans- 
actions. 

It  will  be  noted  that  the  increase  in  clearings  from 
year  to  year  has  not  been  uniform.  The  decrease  was 
nearly  fifty  per  cent,  from  1857-58,  due  in  a  large  meas- 
ure to  the  panic  of  1857.  Thence  the  increase  was  nor- 
mal until  the  outbreak  of  the  Civil  War,  when  business 
interests  throughout  the  country  received  a  severe  blow, 
and  the  clearings  declined  till  1863,  when  there  was  a 
sudden  turn,  followed  by  an  increase  for  the  next  three 
years. 

The  requirements  of  the  new  system  soon  exposed  a 
weakness  in  the  management  of  eight  banks,  and  in  con- 


BALANCES  PAID  IB  MOBEY  FOR  16  YEARS 

• 

Piscal 

years 

eoding 

Sept.  30 

No.  OP 
UEMBEBS 

BALANCE  FOE  YEAB 

ATEBAQE 
DAILY  BALANCE 

Balances 
to  Clear'gs 

Per  Cent. 

1854 

50 

$297,411,493.69 

$988,078.06 

5'' 

1855 

48 

289,694,137.14 

940,565.38 

^540 

1856 

50 

334,714,489.33 

1,079,724.16 

483 

1857 

50 

365,313.901-69 

1,182,245.64 

439 

1858 

46 

314,238,910.60 

1,016,954.40 

6«6 

1859 

47 

363,984,682.56 

1,177,943-96 

564 

i860 

50 

380,693,438.37 

1,232,017.60 

5"^'^ 

1861 

50 

353.383,944-41 

1,151,087.77 

59, 

1862 

50 

415.530.331-46 

1,344,758.35 

604 

1863 

50 

■677,626,482.61 

2,207,252.39 

455 

1864 

49 

885,719,204.93 

2,866,405.19 

3" 

1865 

H 

1,035,765,107.68 

3.373,827.71 

3" 

1866 

58 

1,066,135,106.35 

3,472,453.79 

3'' 

1867 

58 

1,144,963.451-15 

3,717,413.80 

309 

1868 

59 

1,125,455,236.68 

3,642,249.95 

395 

1869 

59 

1,120,318,307.87 

3,637.397-10 

299 

1870 

61 

1,036,484,821.79 

3,365,210.46 

3" 

1871 

62 

1,209,721,029.47 

3,927,665.68 

4'^ 

1872 

61 

1,428,582,^07.53 

4,638,255.54 

422 

1873 

59 

1,474,508,024.95 

4,818,653.67 

415 

1874 

59 

1,286,753,176.12 

4,205,075.73 

569. 

1875 

59 

1,408,608,776.68 

4,603,296.65 

56'i 

1876 

59 

1,295,042,028.82 

4,218,377.94 

599 

1877 

58 

1.373.996,301.68 

4,504,90590 

5^" 

1878 

57 

1.307,843,857-24 

4,273,999-53 

581 

1879 

59 

1,400,111,062.86 

4,560,622.35 

556 

1880 

59 

1.516,538,631.29 

4,956,008.60 

407  - 

1881 

61 

1,776,018,161.58 

5,823,010.36 

366 

1882 

62 

1,595,000,245.27 

5,195,440.54 

3'' 

'IP 

64 

1,568,983,196.15 

5,161,128.93 

389 

1884 

62 

1,524,930,993.93 

4,967,201.93 

447 

1885 

64 

1,295,355,251.89 

4,247,069.39 

5'^ 

1886 

64 

1,519,565,385-22 

4,965,899.95 

455 

1887 

65 

1,569,626,324.77 

5,146,315.82 

449 

1888 

64 

1,570,198,527-78 

5,148,191.89 

508 

1889 

64 

1.757.637,473-47 

5,800,783.74 

505 

1890 

65 

1.753.040,145-23 

5,728,889.36 

4<!5 

1891 

64 

1.584.635.499-88 

5,195,526.21 

465 

1892 

65 

1,861,500,574.56 

6,083,335.18 

5'^ 

1893 

65 

1,696,207,175.52 

5,616,580.05 

49-2 

1894 

66 

1,585,241,633.52 

5,214,610.63 

654 

1895 

67 

1,896,574.349-11 

6,218,276.55 

6'» 

1896 

66 

1,843,289,238.66 

6,043,571.27 

628 

1897 

66 

1,908,901,897.67 

6,300,006.26 

601 

1898 

65 

2,338,529,016.43 

7,717,917.54 

58, 

1899 

64 

3,085,971,370.53 

10,218,448.24 

53, 

To 

tals. 

$58,640,345,106.12 

$4,162,727.69 

478 

Reproduction  of  a  Table  Issued  by  the  New  York  Clearing-house. 


206  CLEARING-HOUSES 

sequence  of  their  inability  to  meet  the  demand  upon 
them  for  daily  settlements,  they  were  forced  into  liquida- 
tion. As  a  result,  the  second  year  shows  a  reduction  in 
the  total  business  of  the  clearing-house,  followed  by  a 
gradual  increase,  till  the  panic  of  1857.  The  decline  in 
the  volume  of  exchanges  was  nearly  fifty  per  cent,  from 
1857-58,  but  by  the  following  year  the  recovery  was 
nearly  complete,  due  in  a  large  measure  to  the  passage 
by  Congress  of  the  National  Currency  Act,  which  im- 
mediately expanded  the  circulation.  At  this  point  came 
another  change,  and  there  was  a  slight  decrease  in  the 
clearing  till  1869.  This  year  was  followed  by  an  in- 
crease to  nearly  nine  billions  of  dollars  above  the  record 
of  any  previous  year. 

A  gradual  decline  set  in  again,  from  which  the  business 
of  the  clearing-house  did  not  fully  recover  for  the  next 
twelve  years.  Meanwhile  the  clearings  had  gone  down 
in  1876  nearly  sixteen  billions  of  dollars  below  the  total 
for  1869.  The  resumption  of  specie  payments  by  the 
United  States  Government  on  the  ist  of  January,  1879, 
wrought  a  salutary  change  in  the  business  and  com- 
mercial interests  of  the  country,  and  the  consequent 
effect  upon  the  business  of  the  clearing-house  was  won- 
derful. For  the  year  1878  the  total  exchanges  of 
twenty-two  billion  five  hundred  million  dollars  in  round 
numbers  increased  to  the  prodigious  sum  of  forty-eight 
billion  five  hundred  and  sixty-five  million  dollars  for 
1 88 1,  or  over  one  hundred  per  cent,  in  three  years,  when 
the  high-water  mark  was  reached  in  the  association's  his- 
tory, the  exchanges  for  that  year  running  far  above  the 
record  for  any  previous  or  subsequent  year. 


THE   NEW    YORK   CLEARING-HOUSE  207 

The  failure  of  two  or  three  banks  in  1884,  notably  the 
Marine  Bank  and  the  Wall  Street  Bank,  produced  a  con- 
siderable reduction  in  the  amount  of  exchanges,  but  the 
increase  after  1885  was  rapid,  till  1892,  when  the  volume 
of  exchanges  was  again  reduced,  owing  to  the  general 
stagnation  in  business  and  trade.  In  1896  the  volume  of 
business  was  nearly  twenty  billions  of  dollars  below  the 
record  of  188 1.  In  considering  this  decline,  it  must  not 
be  forgotten  that  the  establishment  of  the  Stock  Ex- 
change Clearing-house  in  1892  has  detracted  very  great- 
ly from  the  volume  of  these  exchanges.  It  is  estimated 
that  to  this  fact  is  due  a  reduction  of  forty  millions  to 
sixty  millions  of  dollars  a  day. 

The  variation  in  the  ratio  of  balances  to  clearings  dur- 
ing this  period  has  not  been,  as  a  rule,  abnormal.  The 
maximum  was  reached  in  1895,  when  the  per  cent,  was 
6.71,  and  the  minimum  in  1869,  when  it  reached  the  low 
mark  of  2.99  per  cent. 

The  largest  transactions  for  any  one  day  since  the 
organization  of  the  clearing-house  took  place  April  i, 
1899,  when  they  reached  the  prodigious  sum  of  three 
hundred  and  seventy  million  two  hundred  and  twenty- 
eight  thousand  nineteen  dollars  and  twelve  cents.  The 
smallest  transaction  for  any  one  day  was  October  30, 
1857,  amounting  to  eight  million  three  hundred  and  fifty- 
seven  thousand  three  hundred  and  ninety-four  dollars 
and  eighty-two  cents. 

The  largest  balance  resulting  from  any  one  day's  ex- 
changes was  on  January  3,  1900,  amounting  to  nineteen 
million  seven  hundred  and  eighty-eight  thousand  six 
hundred  and  sixty-five   dollars   and  forty  cents.     The 


208  CLEARING-HOUSES 

smallest  balance  on  record  was  on  October  30,  1857, 
amounting  to  four  hundred  and  eighty-nine  thousand 
seven  hundred  and  twenty  dollars  and  thirty-two  cents. 

The  greatest  amount  of  exchanges  brought  to  the 
clearing-house  by  any  one  bank  was  on  May  23,  1899, 
amounting  to  fifty-three  million  three  hundred  and  forty- 
one  thousand  seven  hundred  and  eighty-two  dollars  and 
thirty-one  cents.  The  greatest  amount  of  exchanges 
taken  away  from  the  clearing-house  by  any  one  bank  was 
on  May  23,  1899 — forty-five  million  eight  hundred  and 
sixty-nine  thousand  fifty-five  dollars  and  ninety-six  cents. 

The  largest  balance  ever  paid  by  the  clearing-house 
to  any  one  bank  was  on  May  9,  1899 — thirteen  million 
four  hundred  and  sixty-two  thousand  three  hundred  and 
seventy-nine  dollars  and  seventy-eight  cents.  The 
largest  balance  ever  paid  by  a  single  institution  to  the 
clearing-house  was  paid  by  the  Assistant  Treasurer  of  the 
United  States,  September  19,  1890 — eleven  million  five 
hundred  and  seventy-two  thousand  four  hundred  and 
one  dollars  and  ninety-four  cents.  The  smallest  balance 
ever  paid  by  the  clearing-house  to  any  one  bank  was  on 
December  16,  1873,  amounting  to  ten  cents.  The  small- 
est balance  ever  paid  to  the  clearing-house  by  any  one 
bank  was  on  September  22,  1862,  amounting  to  one  cent. 

Such  is  the  history  of  the  New  York  Clearing-house. 
Standing  foremost  among  the  financial  institutions  of 
America,  we  may  well  forecast  for  it  a  future  of  still 
greater  importance  to  the  business  world. 


CHAPTER   XIII 

THE   CLEARING-HOUSE   ASSOCIATION   OF  THE 
BANKS   OF  PHILADELPHIA 

Early  History — Runners'  Exchange — The  Morning  Exchange — 
Gold  Depository— Clearing-house  Due -bills— Settlements 
without  the  Use  of  Money — Comparison  of  Bank  State- 
ments—  Collateral  Security  —  Assessment  of  Expenses  — 
Admission  of  New  Members — Plan  of  Administration — 
List  of  Presidents — Failures  and  Resulting  Litigation. 

The  Clearing-house  Association  of  Philadelphia  is  a 
voluntary,  unincorporated  association  of  certain  banks  of 
that  city;  its  chief  object  being  to  efTect,  at  a  central  point 
called  the  clearing-house,  the  daily  exchanges  of  items 
between  the  associated  banks.  It  was  established  in 
1858,  five  years  after  that  of  New  York,  and  with  essen- 
tially the  same  Rules  and  By-laws.  Prior  to  this,  the 
cashiers  met  at  a  central  point  and  adjusted  the  balances 
in  the  morning  exchanges,  which  were  afterward  col- 
lected in  cash  by  the  runners  of  the  creditor  banks  at  the 
counters  of  the  debtor  banks.  In  this  exchange  were 
included  all  items  received  in  the  morning  mail. 

The  banks  of  Philadelphia  are  not  so  concentrated  in 
location  as  are  those  of  New  York  or  Boston,  and  this 
very  greatly  enhanced  the  labor  of  the  runners,  who  had 
to  make  the  interchange  of  items.  They  called  those 
banks  most  remote  from  the  banking  centre  "  the  ex- 

209 


210  CLEARING-HOUSES 

tremities,"  and  it  was  indeed  a  most  unenviable  task  to 
make  the  rounds  of  these  daily.  Accordingly,  the  feel- 
ing early  prevailed  that  the  exchanges  would  be  greatly 
facilitated  if  only  the  items  of  the  previous  day  were  in- 
cluded in  that  day's  exchange.  In  1862,  only  four  years 
after  the  establishment  of  the  clearing-house,  Wm.  H. 
Rhawn,  who  for  a  long  time  was  president  of  the  National 
Bank  of  the  RepubHc,  proposed  the  introduction  of  a 
second  exchange,  and  after  a  year's  discussion  by  the 
clearing-house  committee,  it  was  adopted.  This  is  called 
the  Runners'  Exchange,  and  it  is  so  named  because  it  is 
in  a  large  measure  a  substitute  for  the  work  previously 
performed  by  the  runners. 

This  runners'  exchange  includes  all  notes  and  accept- 
ances due  that  day,  and  all  items  in  the  morning  mail, 
made  payable  at  the  banks.  Through  it  are  nearly  al- 
ways returned  the  items  not  good  that  were  included  in 
the  morning  exchange. 

The  morning  exchange  takes  place  at  8.30  o'clock,  and 
includes  only  the  items  of  the  previous  day.  The  method 
is  essentially  the  same  as  that  of  New  York,  and  dififers 
from  that  of  Boston  only  in  the  requirement  of  a  receipt 
for  packages  as  delivered.  The  runners'  exchange  is 
fixed  at  11.30,  so  that  the  clerks  from  the  debtor  banks 
at  the  morning  exchange  can  pay  their  debts  before  the 
runners'  exchange,  and  the  clerks  from  creditor  banks 
can  receive  the  amounts  of  their  credits  after  the  ex- 
change. 

The  method  of  the  runners'  exchange  differs  somewhat 
from  that  in  the  morning  exchange.  Only  one  clerk 
from  each  bank  is  employed;  whereas  two  are  required 


i 


^QQQQQQQQQQQQQQQQQQi 


0\ 

00 


i 


If 

II 


o 


8 


f3 


CD 


eS 

2     ^ 

?    . 
^  U 

^    ■§ 

§-^. 

V      §      (D 

|g| 


,^<5®*©©^^<^^'5*9f^©©©©©©^^©©^^©^^v 


3 


c  ~ 


V>- 


3^<5©©©©©©©©©C 


^f^*^ '!''*©©©©©©©'!* '!!^'^^'^©©©© 


212  CLEARING-HOUSES 

in  the  earlier  clearings.  Each  clerk  upon  his  arrival 
first  deposits  the  items  which  he  holds  on  the  other  banks, 
and  then  takes  his  position  at  the  desk  of  his  own  bank. 
Promptly  at  11.30  o'clock  each  clerk  begins  to  Hst  and 
add  the  items  deposited  for  his  bank.  The  balances  are 
then  adjusted  by  due-bills  or  checks,  after  which  the 
clerks  repair  to  their  several  banks. 

The  method  of  settling  balances  at  these  two  ex- 
changes dififers  from  that  pursued  in  various  other  clear- 
ing-house associations.  The  Farmers'  and  Mechanics' 
National  Bank  receives  in  special  trust  such  gold  coin  as 
any  of  the  members  voluntarily  deposit  with  it  for  safe- 
keeping for  clearing-house  purposes.  This  deposit 
ranges  at  the  present  time  from  five  million  dollars  to 
six  million  dollars.  Against  such  deposits,  certificates, 
in  denominations  of  five  thousand  dollars  and  ten  thou- 
sand dollars,  are  issued  to  the  depositing  banks,  signed 
by  the  manager  of  the  Clearing-house  Association,  or  by 
his  assistant,  or  by  some  other  person  designated  by  the 
association  for  the  purpose,  and  countersigned  by  the 
Farmers'  and  Mechanics'  National  Bank.  These  certifi- 
cates are  negotiable  only  among  the  associated  banks, 
and  are  receivable  by  them  in  the  payment  of  balances  at 
the  clearing-house  for  the  morning  exchange.  The  coin 
thus  placed  on  deposit  is  the  absolute  property  of  such  of 
the  associated  banks  as  are,  for  the  time,  the  holders  of 
the  certificates,  and  is  held  by  the  depository  subject  to 
withdrawal  on  presentation  of  the  properly  indorsed  cer- 
tificates at  any  time  during  banking  hours. 

There  is  also  a  constitutional  provision  that  the  man- 
ager of  the  clearing-house  shall  receive  the  certificates 


Q 


H 


Q 


w 

O 
X 

6 
z 

2 
< 

U 


6^ 


-Si 


H^  o 


?" 
-o 


^ 


J3 


3 


U 


S) 


■os= 


'snssi  J3)jB  Asp  31])  3snoH-3u!JV3i3 
sqi  qSnojqi  ssSuvqoxs  sq)  ui  X|uo  siqBXBd  st  pus 
'uosjsd  Suizuoqinv  jsqious  Xq  psuSisjsjunoo  puv 
3UO  Xq  psu'ais  uaqib  poo3  Xiuo  si  inq-snQ  siqx 


J3iqSB3 


aaNDisuaxNnoo 


214  CLEARING-HOUSES 

issued  by  the  assistant  treasurer  of  the  United  States  for 
clearing-house  purposes  under  any  act  of  Congress,  in 
settlement  of  balances  due  in  the  morning  exchange. 
These  certificates,  it  is  provided,  must  be  indorsed,  "  Pay 
to  the  order  of  a  bank,  member  of  the  Clearing-house 
Association  of  the  banks  of  Philadelphia."  These  cer- 
tificates are  issued  in  denominations  of  five  thousand  dol- 
lars and  ten  thousand  dollars,  and  on  legal  tender  notes 
only.  Both  the  gold  certificates  and  the  legal  tender 
certificates  are  exclusively  used  in  the  payment  of  the 
balances  at  the  morning  exchange;  but,  as  they  are  in 
denominations  of  five  thousand  dollars  and  ten  thousand 
dollars,  exclusively,  some  other  medium  must  be  em- 
ployed in  the  payment  of  balances  and  parts  of  balances 
under  five  thousand  dollars  at  the  morning  exchange, 
and  the  total  of  each  balance  at  the  runners'  exchange. 
This  is  done  with  clearing-house  due-bills  (see  form  on 
another  page),  issued  by  the  debtor  banks  to  the  clearing- 
house manager,  who  deposits  them  in  the  Philadelphia 
National  Bank,  which,  in  turn,  sends  them  through  the 
exchanges  against  the  debtor  banks  on  the  following  day. 
These  clearing-house  due-bills  can  be  used  only  on  the 
day  of  issue,  and  are  payable  only  in  the  exchanges 
through  the  clearing-house  the  day  after  issue. 

yjhe  manager  issues  to  creditor  banks  manager's 
checks  on  the  Philadelphia  National  Bank  for  the  amount 
of  their  credit,  under  five  thousand  dollars,  being  the 
amount  of  the  due-bills  deposited  with  that  bank.  Banks 
are  required  to  give  due-bills  to  the  other  banks  upon 
demand,  in  payment  of  items  at  their  counters,  where  the 
'amount  exceeds  one  hundred  dollars.     They  are  also  re- 


CLEARING-HOUSE    OF    PHILADELPHIA 


215 


quired  to  furnish  to  each  other,  and  to  the  manager  of 
the  clearing-house,  the  names  and  signatures  of  all  per- 
sons authorized  to  sign  or  countersign  due-bills. 

By  this  means  the  balances  are  settled  from  day  to  day 
without  the  use  of  a  single  penny  of  money.     The  risk 


WEEKLY    STATEMENT 


Average  Condition  for  the    ) 
Week    preceding    Monday,    S 


190. 


Capital 
Stock 


Loans  and 
Discounts 


Lawful 
Money 
Reserve 


Due  from 
Other 
Banks 


Due  to 
Other 
Banks 


Deposits 


Due  by 


Due  to 


.New  York,  $. 


.Cashier 


Form  of  Weekly  Statement  Required  of  Philadelphia  Banks. 


attending  the  transfer  through  the  streets  of  the  city  of 
large  sums  of  money  is  obviated,  and  the  greatest  pos- 
sible ease  is  secured  in  the  receipt  and  disbursement  of 
balances. 

In  1 89 1,  after  the  runners'  exchange  had  been  in  opera- 
tion for  some  twenty-eight  years,  the  question  arose  as 


2 16  CLEARING-HOUSES 

to  its  abandonment,  partly  on  the  ground  of  economy. 
The  proposition  to  consoHdate  the  two  exchanges  was 
brought  up  at  one  of  the  meetings  of  the  association,  but 
after  considerable  discussion  it  was  laid  on  the  table. 
The  advantage  to  the  banks  of  being  able  to  ascertain 
before  3  o'clock  whether  the  items  received  in  the  morn- 
ing mail  are  good  outweighed  other  considerations,  and 
accordingly  the  original  plan  was  continued. 

The  provision  of  the  constitution  regarding  statements 
is  as  follows:  Each  bank  shall  furnish  on  Mondays,  for 
publication,  a  statement  of  its  average  condition  for  the 
previous  week,  after  deducting  the  daily  exchanges  from 
the  gross  figures  of  the  preceding  day.  To  each  state- 
ment shall  be  appended  the  state  of  the  account  of  the 
bank  with  New  York  on  the  day  of  report.  These  state- 
ments shall  be  certified  by  the  president,  cashier,  or  as- 
sistant cashier. 

Each  bank  is  also  required  to  furnish  a  daily  statement 
to  the  manager,  but  not  for  publication,  certified  by  the 
general  book-keeper.  Such  statement  is  to  be  made 
before  the  commencement  of  business  and  sent  to  the 
clearing-house  with  the  morning  exchanges.  Thus  the 
Philadelphia  Association  is  more  rigid  even  than  New 
York  in  this  particular,  and,  indeed,  more  exacting  than 
any  other  clearing-house  association  in  the  country.  In 
many  cases,  especially  in  the  larger  cities  of  the  country, 
a  weekly  statement  is  required,  but  in  no  city,  except 
Philadelphia,  is  a  statement  required  oftener  than  once 
a  week. 

A  comparison  of  the  weekly  statement  of  average 
condition  of  the  Philadelphia  banks  with  the  Boston  and 


CLEARING-HOUSE    OF    PHILADELPHIA 


217 


New  York  statements  will  reveal  some  interesting  facts. 
A  glance  at  the  capital  stock  of  the  different  banks 
in  Philadelphia  will  show  an  average  far  below  that  of 


20 


J^f 


Daily  Statement 


of  THE  r'HeST  iT.A.TIOiT.AJL.  B-AJfcT3C 
as  agreed  by  the  action  of  a  Meeting  of  the  Clearing  House  AsMciation,  held 
January  8,  1872.  Such  Statement  is  to  be  made  eotrf  day  before  the  com- 
mencement  of  busness,  and  sent  with  tht  Exckanget,  to  the  Clearing  Home, 
at  or  before  half-.pist  Eight  o'clock,  A.  M. 


Loans  and  Discounts,  including  all  Interest 
Bearing  securities  of  the  United  States. 

Individual  Deposits, 

Banks'  and  Bankers'  Deposits.     • 

Total  Deposits, 
Less  Due  from  Banks  and  Bankers,  exclusive 
of  Reserve  Agents,          .... 

NetDeposits.  .... 

Specie. 

U.S.  Legal  Tender  Notes.          .        .        - 
U.  S.  Ugal  Tender  Certificates,          •        - 
U.  S.  Treasury  Gold  Certificates,      . 
Clearing  House  Gold  Certificates, 

Cash  Rrserve. 

Due  by  Reserve  Agents,      .... 

Total  Reserve,          -        • 

CircuUtion, 

National  Bank  Notes.         .... 

/  certify  that  the  above  ttatement  is  eorrect 
the  books  of  the  Bank. 


by 


Form  of  Daily  Statement  Employed  by  the  Banks  of  Philadelphia. 


New  York  or  Boston.  Of  the  thirty-three  members,  only 
three  are  capitalized  at  one  million  dollars  each;  two  at 
one  and  a  half  million  dollars,  and  one  at  two  million 


2l8 


CLEARING-HOUSES 


AVERAGE  CONDITION  OF  THE  BANKS  IN  PHILADELPHIA, 

For  the  Week  preceding  Monday,  October  16th,  1899, 

Aa  fUmlahed  by  JOHN  O.  BOTD.  HuAgw  PhOMlalphU  CImrtat  Boom. 


BANKS. 

CAPITAL 
STOCK 

LOANS  AND 
DISCOUNTS 

UwlylMoMy 

OM«r  Bb. 

OMUBk.. 

DEPOSITS 

C««Ut.«, 

Na  1  PHn.AnFn.PHlA  NATIONAL 

11.500.000 

315.788.000 

15,855,000 

«1,2«4.000 

•5,794.000 

114,029.000 

•270.UO0 

»  NORTH  AMERICA 

1.000,000 

7.4*0.000 

3,001.000 

927.000 

I.ln7,000 

7.881.000 

89.000 

S  FARM'S  A  MECHB  NATIONAL 

2.0O0.00O 

8.444.000 

1.731,000 

1,290,000 

3.479.000 

4.673.000 

l.l»2.00<) 

6  MECHANICS  NATIONAL 

500,000 

:|.181.000 

795,000 

488,000 

1.115.000 

MI6.000 

358,000 

<  NAT  BR.  OF  V.  UBERTIGB 

500.000 

3.540.000 

789,000 

221,000 

317.000 

3.0U2,«» 

45,000 

7  80UTHWARK  NATIONAL 

250.000 

l.-.»5.000 

293,000 

65,000 

88.000 

1.153,000 

45,000 

«  KENSINGTON  NATIONAJL- 

250.000 

1,326,000 

371.000 

78.000 

1,206,800 

134.000 

9  PENN  NATIONAL, 

500.000 

3,880.000 

1.022,000 

247,000 

487.000 

3.;v8.ooo 

45,000 

10  WESTERN  NATIONAL 

400.000 

•A817.000 

842.000 

281.000 

rAOOO 

2ja7.000 

311.0011 

II  MANUFACTURERS  NAPL 

500.000 

2,473.000 

550,000 

314^000 

749.000 

I.9O6.O0O 

45.000 

13  OIRARD  NATIONAL 

1.000.000 

6.90!(.000 

l,65(i.000 

1.100,000 

2,110.000 

5.449.00O 

45.00U 

U  TKADE8MENS  NATIONAL  

500.000 

3.787.000 

1,218,000 

862.000 

•'..TM.WIO 

2.772.000 

45.0.10 

I&  CON60UDATION  NATIONAL 

300.000 

1.873.000 

331.000 

190,000 

243.000 

1.ZBA000 

270,000 

400.000 
600.000 

942.000 
4.695,000 

45.000 
45.000 

18  CORN  EXCHANGE  NATIONAL... 

7,321.000 

2,362.000 

1,188,000 

8880,000 

500.000 

S.'JOS.OOO 

921.000 

815.000 

1,135.000 

209.000 

20  FIRST  NATIONAL 

1,000,000 

7.729,000 

•2,5;4.-000 

90O.O0U 

3,6113,000 

6,15»,000 

45,00u 

21  THIRD  NATIONAL 

600,000 

3,752,000 

1.066,000 

320.000 

678,000 

3,780,000 

44.000 

23  SIXTH  NATIONAL 

150.000 

921,000 

304,000 

84.000 

944.000 

83,000 

24  BIGHTH  NATIONAL 

275.000 

2.354.000 

'«6I.O0O 

158,000 

2,000 

2,342.000 

43.0UO 

26  CENTRAL  NATIONAL 

750,000 

7.975.000 

2,152.000 

519,000 

2.860.000 

5.653.O0O 

46,000 

it  NATIONAL  SECURITY 

t50,000 

1.778,000 

441.000 

157.000 

1,850,000 

89,000 

2»  CENTENNIAL  NATIONAL 

800.000 

2.3O4.00O 

•18.000 

203.000 

268,000 

2,493,000 

90,000 

30  MERCHANTS'  NATIONAL 

400,000 

1.683.000 

1,078.000 

6,755.000 

4,414,000 

635.00U 

32  INDEPENDENCE  NATIONAL 

600,000 

4,224.000 

1.191.000 

462.000 

1,582,000 

3.5!l9,000 

45.001. 

33  NINTH  NATIONAL 

300,000 

1.69ti.U00 

508.000 

325.000 

16.000 

I.929.O0O 

91,000 

34  TENTH  NATIONAL.. 

200,000 

804.UO0 

260,000 

4^000 

24,000 

780.000 

86,000 

3«  NORTHWESTERN  NA'TIONAL.. 

SOCOOO 

I.85B.00V 

539,000 

88,000 

19,000 

2.024,000 

69,000 

37  SOUTHWESTERN  NATIONAI 

200,000 

763.000 

141,000 

36,000 

72-,<.00O 

46,000 

39  FOURTH  STREET  NATIONAL 

1,500,000 

IS.S54.000 

5,958.000 

918.000 

12.016,000 

10.665.000 

678.000 

40  MARKET  STREET  NATIONAL 

5U0.00O 

2.784.000 

845,000 

368,000 

806,000 

3,284.000  1 

45,000 

42  QUAKER  CITY  NATIONAL 1 

500,000 

•2.218,000 

488,000 

84,000 

10.000 

1.946.000 

269.001. 

43  NORTHERN  NATIONAL 

200.000 

1.081.000 

305,000 

28,000 

12,000 

1.186,000 

69.000 

T«T.^ j 

»i»,«15,000 

»14.'«,59U,000 

841.973,000 

814,566.000 

652,921.000 

tl  12,6411.000 

(5,491.000 

COMPARISONS 


DMfwne.  IneraiML  IneraMS, 

62J87.0UU        6857.000        11.459,000        11.814.000      «l. 137.000 


CLEARINGS  AND  BALANCES. 

OcL     9tb 610.148,677  79  •1.909,5'iT  ttt 

-  lOlb 17,032J09  3«  2.136,473  0» 

"     llib 15,816.93103  I.TI0:44SW 

*     12Ui 15,534,723  68  l,)«Mw278  Tt 

'     I3ib. 18,661.358  OS  MIS.SOI  Tt 

-  Uih. 14,I30,76»  48  S.II2438  68 


686,339.753  27 


611; 


A  statement  of  the  Average  Condition  of  Philadelphia  Banks. 

dollars,  making  a  total  of  only  six  with  a  capital  of  one 
million  dollars  or  more.  The  aggregate  capital  of  the 
members  is  only  about  forty  per  cent,  of  that  of  the  mem- 


CLEARING-HOUSE    OF    PHILADELPHIA  219 

bers  at  Boston  and  thirty-three  per  cent,  of  the  capital 
of  the  members  at  New  York. 

In  Philadelphia,  as  in  New  York,  the  various  items  are 
included  under  seven  heads,  but  are  not  the  same 
throughout.  Both  give  "  Capital  Stock  "  and  "  Circula- 
tion and  Deposits "  in  common.  New  York  reports 
"  Loans "  and  Philadelphia  "  Loans  and  Discounts." 
Philadelphia  reports  also  ''  Lawful  Money  Reserve," 
"  Due  from  Banks,"  and  "  Due  to  Banks,"  which  are  not 
given  in  the  New  York  reports. 

In  addition  to  the  protection  afiforded  each  member  by 
these  statements,  each  bank,  upon  becoming  a  member, 
is  required  to  deposit  collateral  with  the  clearing-house 
committee,  as  security  for  its  daily  settlements,  in  the 
following  proportion  to  capital:  Banks  with  capitals  of 
eight  hundred  thousand  dollars  and  over,  ten  per  cent. 
Banks  with  capitals  of  five  hundred  thousand  dollars  and 
under  eight  hundred  thousand  dollars,  fourteen  per  cent. ; 
but  not  to  be  required  to  deposit  over  eighty  thousand 
dollars.  Banks  with  capitals  over  two  hundred  and  fifty 
thousand  dollars  and  under  five  hundred  thousand  dol- 
lars, twenty  per  cent.;  but  not  to  be  required  to  deposit 
over  seventy  thousand  dollars.  Banks  with  capitals  of 
and  under  two  hundred  and  fifty  thousand  dollars  shall 
deposit  not  less  than  fifty  thousand  dollars. 

The  rules  of  the  association  further  provide  that  if, 
after  any  bank  shall  have  become  a  member  of  the  as- 
sociation, the  clearing-house  committee  shall  deem  the 
collaterals  deposited  by  such  bank  to  be  insui^cient  se- 
curity for  its  daily  transactions,  the  committee  may  from 
time  to  time  require  such  bank  to  deposit  additional  col- 


220  CLEARING-HOUSES 

lateral  security  therefor.  The  rules  also  contain  the 
following :  "  It  is  understood  by  all  banks  making  such 
deposits  that  they  alone  are  responsible  for  any  loss  on 
their  collaterals  deposited,  resulting  from  the  failure  to 
make  demand  and  protest,  or  from  any  other  neglect  or 
omission." 

In  case  of  default  by  any  member,  the  clearing-house 
committee  is  instructed  to  apply  their  deposit  of  collateral 
'*  to  the  payment  of  any  balances  due  by  such  bank  at  the 
clearing-house  or  to  the  reimbursement  pro  rata  of  the 
several  banks  furnishing  any  such  balance,  and  the  sur- 
plus, if  any,  shall  be  held  by  the  committee  as  collateral 
security  for  any  indebtedness  of  such  defaulting  bank  to 
the  clearing-house  committee  or  to  the  association  or  any 
of  its  members,  and  also  as  security  for  all  costs,  expenses, 
and  counsel  fees,  paid  by  the  clearing-house  committee 
for  the  collection  of  the  security  representing  the  deposit, 
or  which  the  committee  may  be  compelled  to  pay  by 
reason  of  holding  the  same."  The  clearing-house  com- 
mittee is  required  to  determine  the  times  when  exchanges 
or  deliveries  of  collateral  security  shall  be  made. 

The  constitution  further  provides  that,  "  Bills  receiv- 
able deposited  as  such  security  shall  in  no  case  be  received 
at  more  than  seventy-five  per  cent,  of  their  face  value, 
unless  accompanied  by  collateral  security  of  greater 
value,  when,  in  the  discretion  of  the  committee,  such  bills 
may  be  received  to  an  amount  not  exceeding  their  face 
value.  It  shall  be  the  privilege  of  each  bank  to  examine 
twice  a  year,  or  oftener,  at  its  option,  the  securities  in  the 
custody  of  the  clearing-house  committee,  deposited  by  it 
as  collateral  security,  to  compare  the  same  with  the  re- 


CLEARING-HOUSE    OF    PHILADELPHIA 


ceipt  given  by  the  committee,  and  if  found  correct,  to 
execute  to  the  committee  a  certificate  setting  forth  the 
different  kinds  and  amounts  thereof,  and  that  the  same 
are  in  the  possession  and  custody  of  the  committee  at  the 
date  of  such  certificate.  Such  examination  may  be  made 
by  an  ofBcer  of  such  bank,  or  by  a  committee  of  directors 
duly  appointed  for  the  purpose." 

As  in  New  York  and  Boston,  the  expense  of  printing 
is  apportioned  equally;  but  while  other  associations  re- 
quire that  each  bank  shall  be  assessed  a  stated  sum  and 
pay  the  remainder  thereafter,  in  proportion  to  its  ex- 
changes for  a  given  period,  the  Philadelphia  Association 
requires  that  all  such  expenses  shall  be  borne  by  the  sev- 
eral members,  according  to  capital,  as  follows:  Banks 
having  capitals  of  less  than  five  hundred  thousand  dollars 
shall  pay  one  hundred  dollars  each  annually.  Banks  hav- 
ing capitals  of  five  hundred  thousand  dollars  and  less 
than  one  million  dollars  shall  pay  two  hundred  dollars 
each  annually.  Banks  having  capitals  of  one  million  dol- 
lars and  upward  shall  pay  three  hundred  dollars  each  an- 
nually, and  in  the  same  proportion  if  more  funds  become 
necessary.  The  expenses  are  much  lower  than  at  New 
York,  Chicago,  or  Boston. 

The  fines,  amounting  to  three  hundred  dollars  to 
four  hundred  dollars  annually,  have  always  been  donated 
to  the  Bank  Clerks'  Beneficial  Association.  In  the  last 
four  or  five  years  the  disorder  fines  have  amounted  to 
only  three  or  four  dollars.  None  of  the  fines  is  high 
comparatively.  For  no  offence  is  it  greater  than  one 
dollar,  except  for  failure  to  be  punctual  in  the  payment 
of  debtor  balances,  in  which  case  it  is  two  dollars  for  each 
offence. 


222  CLEARING-HOUSES 

Banks  may  be  admitted  from  time  to  time  to  member- 
ship in  the  association,  but  the  requirements  are  more 
rigid  than  in  any  other  city.  AppHcations  must  be  made 
to  the  clearing-house  committee,  and  upon  a  favorable 
report  by  them  to  the  association  the  applicant  may  be 
admitted  by  an  affirmative  vote  of  three-fourths  of  all 
the  members,  and  by  paying  an  admission  fee  of  ten 
thousand  dollars,  and  certifying  assent  to  the  Articles  of 
Association.  In  no  other  city  is  the  admission  fee  so 
high,  and  in  only  a  few  is  more  than  a  majority  vote  of 
the  members  necessary  for  admission. 

The  power  of  suspension  is  lodged  in  the  clearing- 
house committee,  but  no  suspension  can  take  place  unless 
a  majority  of  the  committee  are  present  and  vote  unani- 
mously in  favor  thereof.  In  the  event  of  such  action,  it 
is  the  duty  of  the  committee  to  call  a  meeting  of  the 
association  immediately  to  take  the  matter  into  consid- 
eration. 

The  administration  of  the  clearing-house  is  vested  in 
a  president,  secretary,  manager,  assistant  manager,  com- 
mittee of  arbitration,  and  clearing-house  committee. 
The  latter  committee,  consisting  of  six  bank  officers,  is 
elected  annually  and  in  it  is  vested  almost  absolute  power. 
This  committee  appoints  the  manager  and  assistant  man- 
ager, establishes  rules  to  be  observed  at  the  clearing- 
house, subject  to  the  approval  of  the  association,  and  gen- 
erally supervises  clearing-house  affairs.  It  has  charge  of 
the  funds  belonging  to  the  association,  draws  on  each 
bank  for  its  quota  of  expenses,  and  submits  to  the  associ- 
tion  detailed  accounts  of  expenditures.  It  takes  into  its 
custody  the  collateral  securities  required  to  be  deposited 


CLEARING-HOUSE    OF    PHILADELPHIA  223 

by  the  banks.  This  committee  has  power  to  remove 
the  manager  or  any  of  the  assistants  whenever  in  its 
opinion  the  interests  of  the  association  require  it.  The 
committee  can  examine  the  books  and  assets  of  any 
member  of  the  association,  whenever  it  shall  deem  it 
necessary. 

The  committee  of  arbitration  is  also  elected  annually 
and  is  composed  of  six  bank  ofificers.  Upon  it  devolves 
the  duty  of  hearing  and  determining  disputes  between 
members  of  the  association,  when  submitted  to  it  by 
either  party.  The  duties  of  this  committee,  however,  are 
not  very  arduous,  as  the  records  show  it  has  met  only 
twice  in  twenty-one  years. 

The  president  is  elected  annually  by  ballot  and  presides 
at  all  meetings  of  the  association.  He  is  ex-oiHcio  mem- 
ber of  each  of  the  standing  committees,  and  in  his  absence 
a  president  pro  tempore  is  appointed. 

At  the  beginning  of  the  organization  it  happened  that 
the  man  who  had  been  longest  president  of  a  bank  was 
made  president  of  the  association.  He  was  repeatedly 
re-elected,  his  final  term  expiring  after  ten  years  of  ser- 
vice. The  precedent  of  electing  and  re-electing  to  the 
presidency  of  the  association  the  one  who  has  been 
longest  president  of  a  bank  has  since  been  adhered  to, 
so  that  in  the  history  of  the  association  there  have  been 
only  three  presidents,  as  follows:  Joseph  B.  Mitchell, 
from  1858  to  1868,  inclusive;  Joseph  Patterson,  from 
1869  to  1887,  and  James  V.  Watson,  whose  term  of  office 
dates  from  1887. 

The  secretary  is  elected  at  the  annual  meeting  by 
ballot.     It  is  his  duty  to  keep  correct  minutes  of  the  pro- 


224  CLEARING-HOUSES 

ceedings  of  the  association  in  a  book  provided  for  the 
purpose. 

The  manager  has  immediate  charge  of  all  business  at 
the  clearing-house,  and  the  clerks  and  messengers  from 
the  banks  are  under  his  direction.  His  decisions  concern- 
ing details  at  the  clearing-house  are  binding,  until  modi- 
fied by  the  clearing-house  committee.  It  is  his  duty  to 
impose  and  collect  fines  fixed  by  the  association  for  the 
violation  of  rules  at  the  exchanges.  With  the  assistance 
of  the  clerks,  he  performs  the  duties  connected  with  the 
operation  of  clearing,  the  adjustment  and  payment  of 
balances,  the  keeping  of  records,  the  preparation  of  the 
weekly  statements,  and,  in  a  word,  all  the  details  of  clear- 
ing. His  salary  is  fixed  by  the  association  and  he  is  re- 
quired to  give  bond  with  sureties  in  the  sum  of  twenty 
thousand  dollars,  subject  to  the  approval  of  the  clearing- 
house committee.  In  this  connection  it  may  be  remarked 
that  at  Chicago  a  bond  is  required  in  the  same  amount, 
but  at  Boston  and  New  York  it  is  fixed  at  ten  thousand 
dollars. 

Permanent  clerks  are  also  required  to  give  bond  in 
the  sum  of  ten  thousand  dollars  each,  with  approved  se- 
curities. Such  bonds  must  be  examined  by  the  clearing- 
house committee  at  least  once  each  year. 

In  the  history  of  the  Philadelphia  Clearing-house,  four 
of  the  member-banks  have  failed — namely,  the  Fourth 
National  in  1874,  the  Spring  Garden  and  the  Keystone 
National  in  1891,  and  the  Chestnut  Street  National  in 
1897.  The  failure  of  the  Keystone  National  Bank  in- 
volved the  receiver  thereof  and  the  seven  members  of  the 
clearing-house  committee  in  litigation.     The  facts  con- 


CLEARING-HOUSE    OF    PHILADELPHIA  22$ 

nected  with  the  case  and  the  result  of  the  trial  are  very 
interesting  and  important  to  all  clearing-house  associa- 
tions.    The  circumstances  were  briefly  as  follows: 

On  March  20,  1891,  the  Keystone  National  Bank  made 
its  regular  exchanges  at  the  clearing-house,  bringing 
items  to  the  amount  of  seventy  thousand  and  five  dollars 
and  forty-six  cents,  and  receiving  one  hundred  and 
seventeen  thousand  and  thirty-five  dollars  and  twenty- 
one  cents.  The  debtor  balance  of  this  bank,  therefore, 
was  forty-seven  thousand  and  twenty-nine  dollars  and 
seventy-five  cents.  The  bank  failed  to  pay  its  balance 
at  12  o'clock,  in  accordance  with  the  rules,  and  it  was 
not  subsequently  paid.  In  compliance  with  a  previous 
agreement  between  the  associated  banks  and  the  Key- 
stone National  Bank,  the  manager  was  allowed  to  hold 
the  exchanges  received  by  the  latter  until  the  payment 
of  the  balance.  Accordingly,  he  retained  the  packages 
in  his  possession,  and,  after  12  o'clock  on  the  day  of 
failure,  notified  the  banks  which  had  sent  the  ex- 
changes that  they  must  make  them  good  by  the  pay- 
ment into  his  hands  of  that  amount  of  money.  With 
this  request  they  immediately  complied  and  took  away 
the  packages. 

In  addition  to  the  debit  balance  of  forty-seven  thou- 
sand and  twenty-nine  dollars  and  seventy-five  cents  on 
the  morning  of  failure,  the  Keystone  National  Bank  owed 
forty-one  thousand  one  hundred  and  ninety-seven  dollars 
and  thirty-six  cents,  for  which  it  had  issued  clearing- 
house due-bills  in  payment  of  its  balance  on  the  preceding 
day,  and  which  due-bills,  according  to  the  common  rule, 
were  payable  in  the  exchanges  on  the  following  day, 


226  CLEARING-HOUSES 

which  in  this  case  was  the  day  of  failure.  Further,  it 
owed  three  hundred  and  thirty-five  thousand  dollars  on 
clearing-house  loan  certificates,  issued  to  it  by  the  asso- 
ciation on  the  deposit  of  collateral  security  in  obedience 
to  the  terms  of  a  special  agreement  entered  into  between 
said  bank  and  the  Clearing-house  Association.  Acting 
under  the  instructions  of  the  clearing-house  committee, 
the  manager  appropriated  the  sum  of  one  hundred  and 
seventeen  thousand  and  thirty-five  dollars  and  twenty- 
one  cents,  furnished  him  by  the  banks,  to  the  payment 
of  the  obligations  of  the  Keystone  National  to  the  asso- 
ciation as  follows:  In  payment  of  the  debit  balance  of 
the  Keystone  National  Bank  in  that  morning's  ex- 
changes, forty-seven  thousand  and  twenty-nine  dollars 
and  seventy-five  cents;  to  make  good  the  due-bills  given 
by  the  bank  for  its  debtor  balance  on  the  preceding  day, 
including  due-bills  given  to  the  several  banks,  forty-one 
thousand  one  hundred  and  ninety-seven  dollars  and 
thirty-six  cents;  and  the  remainder,  amounting  to  twen- 
ty-eight thousand  eight  hundred  and  eight  dollars  and 
ten  cents,  to  the  cancellation  of  a  part  of  the  three  hun- 
dred and  thirty-five  thousand  dollars  in  clearing-house 
loan  certificates  issued  to  that  bank. 

Upon  a  bill  brought  by  the  receiver  of  the  defaulting 
bank  against  the  seven  members  of  the  clearing-house 
committee,  the  Circuit  Court  rendered  a  decree  for 
seventy  thousand  and  five  dollars  and  forty-six  cents,  with 
interest  from  March  20,  1891,  against  the  defendants,  on 
the  ground  that  after  the  known  insolvency  of  the  named 
bank,  they  applied  its  funds  in  their  hands  or  under  their 
control  to  the  payment  of  its  debts  to  the  Clearing-house 


CLEARING-HOUSE    OF    PHILADELPHIA  22/ 

Association  and  to  members  thereof,  with  a  view  of  giv- 
ing them  an  unlawful  preference  over  other  creditors. 

The  Circuit  Court  of  Appeals,  to  whom  the  case  was 
appealed  by  the  clearing-house  committee,  reversed  this 
decree,  on  the  ground  that  a  bona  fide  exchange  of  items 
had  taken  place  between  the  Keystone  National  Bank 
and  its  clearing-house  association  before  the  bank  ex- 
aminer had  acted,  and  when  the  clearing-house  associa- 
tion had  no  reason  to  suspect  the  impending  failure.  The 
transaction  was  in  the  regular  course  of  business  and  with 
a  view  to  continuing  operation.  The  exchange  was  an 
accomplished  fact,  and  the  only  thing  remaining  to  be 
done  was  the  payment  by  the  Keystone  National  Bank 
of  its  debtor  balance  in  the  morning  exchange.  It  failed 
to  do  this,  and  hence  the  action  of  the  clearing-house 
manager  in  appropriating  the  money  received  from  the 
various  banks  holding  exchanges  on  the  Keystone  Na- 
tional Bank  to  the  payment  of  the  latter's  obligations  to 
the  association  was  a  justifiable  procedure.  The  receiver 
of  the  Keystone  National  Bank  finally  appealed  the  case 
to  the  Supreme  Court  of  the  United  States,  and  in  March, 
1897,  a  decision  was  rendered  in  favor  of  the  clearing- 
house committee. 


CHAPTER  XIV 

THE  BOSTON   CLEARING-HOUSE 

Formation  and  Early  History — Period  of  the  Civil  War— Set- 
tlement of  Balances — Borrowing  and  Loaning  Balances- 
Clearing  for  Outside  Banks. 

Only  three  years  after  the  establishment  of  the  New 
York  Clearing-house  a  similar  association  was  formed  in 
Boston — namely,  in  1856 — for  the  purpose,  as  specified 
in  the  constitution,  of  effecting  a  more  perfect  and  satis- 
factory settlement  of  the  daily  exchanges  of  checks  and 
other  items,  and  of  the  balances  resulting  therefrom.  The 
constitution  was  modelled  very  closely  on  that  of  New 
York,  and,  although  important  changes  have  since  been 
wrought  in  both,  Boston  still  remains  more  nearly  on  the 
New  York  model  than  does  any  other  important  associa- 
tion in  the  United  States.  This  is  so,  for  the  most  part, 
because  the  New  York  Clearing-house  was  the  only  one 
at  that  time  in  the  United  States;  and  hence  to  it  alone 
could  Boston  look  for  a  model. 

The  history  of  the  association  has  been  both  eventful 
and  interesting.  Prior  to  its  establishment  there  was 
much  opposition  to  it,  on  the  ground  that  it  was  an  "  in- 
novation upon  the  established  order  of  things  and  of 
doubtful  expediency,"  but  when  the  pressure  in  favor  of 
its  establishment  became  so  great  that  opposition  on  the 

228 


/ 
THE   BOSTON    CLEARING-HOUSE  229 

part  of  a  few  was  no  longer  of  any  avail  and  it  became 
an  established  fact,  its  great  practical  utility  was  quickly 
demonstrated  and  the  opposing  banks  soon  came  into  it. 

In  less  than  two  years  after  its  formation  the  panic  of 
1857  burst  upon  the  country,  and  in  that  crisis  its  useful- 
ness was  severely  tested.  In  New  York  specie  payments 
were  suspended,  whereupon  the  Boston  banks  imme- 
diately took  action,  and  a  committee  was  appointed  to  re- 
port to  the  association  what  course  should  be  followed, 
in  view  of  the  action  at  New  York.  Upon  the  recom- 
mendation of  that  committee  that  Boston  should  follow 
the  lead  of  New  York,  specie  payments  were  suspended. 
It  thus  became  necessary  to  provide  some  substitute  for 
specie.  Clearing-house  loan  certificates,  based  upon  col- 
lateral as  security,  did  not  come  into  use  until  i860,  and 
hence  a  different  course  was  taken  from  that  generally 
pursued  by  clearing-houses  in  similar  emergencies  since 
that  time. 

The  association  voted  to  permit  its  members  to  use 
their  own  circulating  notes  in  the  settlement  of  balances 
to  a  limited  amount,  based  upon  the  capital  of  each 
bank,  in  no  case  exceeding  five  per  cent.,  except  in  the 
case  of  the  Suffolk  Bank,  which  was  allowed  ten  per  cent., 
it  at  the  time  being  the  redeeming  agent  for  the  note  cir- 
culation of  nearly  all  the  New  England  banks.  These 
bills  thus  received  at  the  clearing-house  were  to  be  re- 
turned to  the  next  day's  settlement,  and  were  to  be  at  the 
joint  risk  of  the  banks  in  proportion  to  the  amounts  of 
their  respective  capitals;  and  the  clearing-house  commit- 
tee were  authorized  to  demand  at  their  discretion  satis- 
factory collateral  security  for  such  bills.    The  banks  using 


230 


CLEARING-HOUSES 


their  notes  at  the  clearing-house  were  required  to  pay  one 
day's  interest  at  a  time. 

The  association,  on  the  day  following  that  upon  which 
this  plan  was  adopted,  having  been  addressed  by  a  com- 
mittee representing  the  merchants  of  the  city,  who  ex- 
pressed their  desire  for  an  expansion  of  the  bank  loans, 
voted  that  the  amount  of  circulating  notes  that  may  be 
used  in  settlements  at  the  clearing-house  be  doubled.  At 
a  subsequent  meeting,  in  order  to  encourage  the  use  of 
specie,  it  was  voted  that  the  manager  keep  an  account 
of  the  specie  paid  in  by  each  bank,  and  in  subsequent 
settlements  repay  to  such  bank,  when  a  creditor,  specie, 
this  reimbursement  to  be  in  the  order  of  payment  by 
the  banks. 

A  few  weeks  later  the  association  voted  that  the 
amount  for  which  the  bills  of  the  associated  banks  may  be 
used  in  the  liquidation  of  balances  at  the  clearing-house, 
be  reduced  fifty  per  cent.,  and  on  December  14,  1857, 
just  two  months  after  suspension,  a  unanimous  vote  was 
cast  in  favor  of  the  resumption  of  specie  payments.  It  is 
probable  that  for  a  short  time  thereafter  the  use  of  bank- 
notes was  continued,  but  within  a  week  it  was  voted  to 
discontinue  altogether  their  further  use  at  the  clearing- 
house. 

From  this  time  on,  the  exchanges  took  place  with  lit- 
tle interruption  till  the  outbreak  of  the  Civil  War,  when 
anxiety  and  distrust  again  seized  upon  the  country.  In 
the  latter  part  of  i860  it  was  voted  to  permit  the  banks 
to  settle  their  balances  at  the  clearing-house  with  their 
own  circulating  notes,  to  the  extent  of  ten  per  cent,  of 
their  capital,  it  being  voted  at  the  same  time  that  it  was 


THE    BOSTON    CLEARING-HOUSE  231 

the  duty  of  the  banks  of  Boston  to  maintain  special  pay- 
ments in  that  crisis.  There  was  much  disturbance  in 
financial  circles  from  that  time  forward,  and  on  August 
27,  1861,  the  association  voted  that  any  bank  which  had 
agreed  to  the  arrangement  entered  into  by  the  banks 
in  New  York,  Boston,  and  Philadelphia,  with  regard  to 
the  national  loan,  could  deposit  with  the  clearing-house 
committee  treasury  notes  of  that  loan  and  receive  cer- 
tificates to  an  amount  not  exceeding  ninety  per  cent,  of 
the  par  value  of  such  treasury  notes.  These  certificates 
were  to  be  known  as  loan  certificates  and  were  to  be 
receivable  at  the  clearing-house  in  the  settlement  of 
balances.  These  were  the  first  certificates  of  the  kind 
issued  by  the  Boston  association. 

Not  long  thereafter  the  New  York  Clearing-house 
again  suspended  specie  payments  and  was  followed  al- 
most immediately  by  Boston,  in  a  resolution  declaring 
that  they  suspend  specie  payments,  until  such  time  as 
they  could  with  safety  resume  their  legitimate  basis  for 
circulation  and  deposit.  That  time  did  not,  in  the  course 
of  events,  arrive  until  seventeen  years  had  passed  by. 

Afifairs  drifted  on  from  bad  to  worse  until  the  panic  of 
1873,  when  the  association  again  authorized  the  issue  of 
clearing-house  loan  certificates,  secured  by  collateral  on 
substantially  the  same  basis  as  the  issue  by  the  banks  in 
New  York.  No  further  action  of  this  kind  was  taken  by 
the  association  until  seventeen  years  later,  when,  in 
1890,  certificates  were  again  issued,  and  these  were  fol- 
lowed by  similar  issues  in  1893  and  1895.  Such  are  the 
important  features  of  the  association's  history. 

The  Boston  Clearing-house  is  located  at  a  central  point 


232  CLEARING-HOUSES 

in  Old  State  Street.  Here,  at  lo  o'clock,  on  the  morn- 
ing of  each  business  day,  the  representatives  of  thirty- 
nine  banks,  members  of  the  association,  meet  and  ex- 
change the  items  which  they  hold  upon  each  other.  The 
clearing-house  is  elongated  in  form,  with  a  double  row  of 
desks  running  full  length,  so  placed  as  to  leave  sufBcient 
space  for  the  delivery  clerks  to  pass  around  next  the  wall. 
The  process  of  exchanging  items  is  precisely  the  same  as 
at  New  York,  except  that  in  Boston  they  have  aban- 
doned the  practice  of  receipting  for  exchanges  as  de- 
livered, on  the  ground  that  it  is  a  useless  expenditure  of 
time. 

In  the  settlement  of  balances,  Boston  has  a  system 
peculiarly  its  own.  The  constitution  declares  that  ''  the 
debtor  banks  shall  pay  to  the  manager  at  the  clearing- 
house the  balances  due  from  them  respectively,  either  in 
coin  or  in  such  other  currency  as  the  laws  of  the  associa- 
tion shall  require,  or  in  such  certificates  as  shall  be  au- 
thorized by  the  Clearing-house  Association,  excepting 
sums  less  than  one  thousand  dollars,  which  may  be  paid 
in  bills  of  the  debtor  banks."  Although  coin  is  specified 
as  acceptable  in  the  payment  of  balances,  it  is  tacitly 
agreed  that  no  silver  will  be  used,  owing  to  its  great 
bulk  and  consequent  inconvenience.  National  bank- 
notes are  not  acceptable,  nor  are  any  other  bills  in  de- 
nominations less  than  twenty  dollars. 

No  money  is  brought  to  the  clearing-house  under  seal 
except  gold,  and,  with  the  exception  of  gold,  all  money 
is  counted  before  being  receipted  for.  Formerly,  all  gold 
coin  was  removed  from  the  banks  and  weighed  at  the 
clearing-house,  but  this  practice  has  been  discontinued. 


THE   BOSTON    CLEARING-HOUSE  233 

In  the  event  of  an  error  in  the  amount  of  currency  re- 
ceived by  a  creditor  bank,  recourse  can  be  had  upon  the 
clearing-house,  provided  such  error  is  discovered  by  the 
clerk  before  leaving  the  clearing-room ;  but  if,  after  leav- 
ing the  clearing-house,  he  should  return  with  a  claim  for 
an  error  or  deficiency  in  the  money  received,  no  recourse 
upon  the  association  would  be  possible,  the  claim  in  that 
case  being  adjusted  between  the  paying  and  receiving 
bank.  In  case  of  an  error  or  deficiency  in  the  coin  con- 
tained in  bags,  reclamations  are  made  by  the  receiving 
banks  directly  against  the  banks  whose  marks  they  carry, 
the  clearing-house  being  in  no  way  responsible  for  the 
contents  of  such  bags.  The  constitution  specifies  that 
such  reclamations  shall  be  made  in  reasonable  time. 

Each  debtor  bank,  at  the  hour  for  making  its  settle- 
ment at  the  clearing-house,  sends  a  ticket  with  an  item- 
ized statement  of  its  balance,  as  shown  in  the  illustrations. 

On  the  back  of  the  receipt  which  the  manager  gives  the 
bank  for  its  balance  is  a  similar  blank,  and  upon  this,  after 
counting  each  balance  as  it  is  paid  in,  he  itemizes  it,  and 
if  he  finds  that  his  statement  agrees  with  the  one  sent  in 
by  the  bank,  he  makes  out  a  receipt  for  the  whole,  being 
satisfied  that  his  work  is  correct.  He  retains  the  orders 
received  from  creditor  banks  as  his  receipts  for  their 
balances. 

Not  more  than  one-third  of  the  total  amount  of  the 
balances,  perhaps,  is  settled  by  the  method  we  have  just 
described.  Many  years  ago  the  custom  sprang  up  at 
Boston  of  borrowing  and  loaning  balances  at  the  morn- 
ing exchanges,  and  the  settlement  of  the  same  by  orders 
on  the  clearing-house,  and  this  has  grown  to  be  one  of  the 


234  CLEARING-HOUSES 

most  important  features  of  their  clearing  system.  It  had 
its  inception  in  a  small  way  some  thirty  years  since,  as  a 
matter  of  convenience  to  debtor  banks,  and  is  quite  unlike 


Boston, 

BALANCE  PAID  CLEARIHG-HOUSE  THIS  DAT  BY 

NATIONAL  BANK  OF  REPUBLIC. 

Be  sure  and  itcmixe  your  balance.    Have  bills 
properly  strapped  and  distinctly  marked. 


Change   

Bills . 

Legal  Tenders    .... 
Clearing-house  Qold  Ctfis. 

Coin 

Gold  Certificates    .    .    . 
Orders    


Amount 


Form  of  Ticket  Used  by  Boston  Banks  for  Notifying  Clearing-house 
Manager  of  Amounts  Paid  in  Making  Settlements. 

anything  else  in  the  clearing-houses  of  the  United  States. 
Before  its  adoption,  debtor  banks  which  found  their  bal- 
ances at  the  morning  exchanges  too  great  for  convenient 
settlement  with  cash,  but  which  could  easily  call  in  the 


THE    BOSTON    CLEARING-HOUSE  235 

necessary  amount  later  in  the  day,  were  accustomed  to 
send  their  representatives  through  the  streets  to  borrow 
from  neighboring  banks.  Owing  to  the  inconvenience 
and  risk  of  this  practice,  the  presidents  and  cashiers  of 
the  banks  began  to  meet  at  the  clearing-house,  and  then, 
after  the  exchanges  had  taken  place,  to  borrow  and  loan 
their  balances.  The  custom  found  favor  with  the  banks 
and  has  gradually  grown  to  such  considerable  propor- 
tions that  some  sixty  per  cent,  of  the  total  balances  are 
now  settled  in  this  way.  On  the  floor  of  the  clearing- 
house at  each  morning  exchange  may  be  seen  a  busy 
group  of  bank  officials,  some  borrowing  balances,  others 
negotiating  loans. 

A  may  find  himself  a  heavy  debtor  and  may  desire  to 
borrow  of  B,  whose  balance  is  a  heavy  credit.  If  B  wishes 
to  loan  to  A,  he  gives  him  an  order  on  the  clearing-house, 
and  the  latter  uses  it  the  same  day  in  the  settlement  of  his 
balance.  All  orders,  therefore,  on  the  clearing-house  are 
accepted  by  the  manager  in  the  settlement  of  balances  to 
the  full  extent  of  their  face  value.  But  A  may  not  desire 
but  a  small  part  of  B's  balance,  in  which  event  B  may 
find  a  dozen  other  banks  anxious  to  borrow,  to  each  of 
whom  he  may  loan  a  portion.  Again,  some,  not  finding  it 
advantageous  either  to  borrow  or  loan,  settle  their  bal- 
ances by  the  usual  cash  payments  at  the  clearing-house. 
In  practice,  some  banks  habitually  loan,  but  never  borrow. 
Others  habitually  borrow,  but  seldom  or  never  loan. 

Although  no  direct  losses  have  ever  occurred  from  this 
practice,  it  is  strenuously  opposed  by  conservative  bank- 
ers on  the  ground  that  it  is  dangerous  for  banks  to  bor- 
row so  heavily  when  they  may  be  called  upon  for  the  full 


2'36  ■  CLEARING-HOUSES 

amount  of  the  loan  without  a  moment's  warning.  For 
example,  A  loans  B  seventy-live  thousand  dollars  to-day, 
and  the  latter  uses  it  in  the  settlement  of  his  balance.  B 
does  not  find  it  convenient  to  return  the  loan  to-morrow, 
and  A,  finding  an  opportunity  a  day  or  two  later  for  a 
better  investment,  sends  through  the  clearing-house  a 
check  on  B  for  the  full  amount.  The  latter  is  left  with  no 
alternative  but  to  pay  the  balance  or  fail.  Any  objection, 
therefore,  to  such  a  custom  seems  on  its  face  plausible, 
but,  in  practice,  as  is  claimed,  a  severe  check  is  placed 
upon  the  borrower  by  the  discretion  of  the  loaner.  It  is 
practically  impossible  for  any  member  to  be  an  habitual 
borrower  without  its  being  known  to  the  other  members. 
Thus  creditor  banks  are  enabled  to  exercise  proper  care 
in  making  loans,  and  thereby  to  avoid  loss. 

The  rate  of  interest  on  such  loans  corresponds  very 
closely  with  the  rate  on  call  loans.  The  newspapers 
regularly  report  the  clearing-house  rate,  and  this  doubt- 
less has  some  influence  on  the  rate  in  the  market.  A 
prominent  banker  has  said  that  the  effect  of  this  custom 
is  to  make  the  rate  higher  than  it  otherwise  would  be, 
as  the  banks  needing  the  money  must  have  it,  no  matter 
what  the  rate  may  be,  but  in  a  weak  market  it  has  the 
efifect  of  making  the  rate  lower,  since  banks  having  a 
surplus  will  accept  a  low  rate  rather  than  hold  cash  over. 

One  important  disadvantage  of  this  plan  of  borrowing 
and  loaning  balances,  and  one  which  has  come  into  prom- 
inent notice  in  certain  instances  of  late,  should  be  men- 
tioned in  this  connection.  A  bank  that  is  a  borrower  of 
clearing-house  balances  is  thereby  deprived  of  the  assist- 
ance in  time  of  distress  afforded  by  clearing-house  loan 


A 


THE   BOSTON    CLEARING-HOUSE  237 

certificates.  As  before  mentioned,  the  members  of  the 
clearing-house  who  are  lenders  of  balances  are  very  sure 
to  know  of  a  given  bank  that  is  an  habitual  borrower,  and 
accordingly  they  are  on  their  guard,  watching  for  the  op- 
portunity to  call  for  the  amounts  they  have  loaned  when- 
ever it  would  seem  that  the  debtor  bank  could  pay  the 
same.  As  soon,  therefore,  as  the  debtor  bank  arranges 
for  clearing-house  loan  certificates,  its  fellow-members, 
who  are  its  creditors,  hold  out  their  hands  for  them, 
thereby  exchanging  unsecured  claims  against  the  bank 
for  the  very  best  security  that  it  can  put  up.  The  debtor 
bank  then  is  deprived  of  the  advantage  of  clearing-house 
loan  certificates  up  to  the  amount  of  its  indebtedness  to 
its  fellow-members. 

To  put  it  otherwise,  the  act  of  borrowing  balances  in 
the  clearing-house  anticipates  the  help  that  otherwise  the 
clearing-house  could  and  would  be  to  the  bank  when 
it  really  needed  assistance.  It  is,  of  course,  impossible  to 
eat  the  cake  and  have  it  too.  During  the  time  this  custom 
has  prevailed  in  Boston,  many  banks,  first  and  last,  have 
found  themselves  embarrassed  thereby,  and  have  been 
compelled  to  struggle  along  in  seasons  of  stringency  with- 
out the  help  that  clearing-house  loan  certificates  would 
have  afforded  them,  simply  because  to  have  asked  for 
them  would  have  advertised  their  condition  in  a  manner 
to  bring  one  class  of  their  creditors  down  upon  them  in 
a  way  to  nullify  all  the  assistance  they  had  obtained,  and 
perhaps  also  draw  the  attention  of  the  business  public 
to  the  embarrassed  condition,  after  they  had  exchanged 
their  good  bills  receivable  for  clearing-house  loan  cer- 
tificates. 


238  CLEARING-HOUSES 

The  plan  of  borrowing  and  lending  balances,  although 
very  generally  acquiesced  in  by  the  banks  of  Boston, 
would  seem  to  be  fraught  with  danger.  It  would  be  less 
alarming,  in  the  estimation  of  many  conservative  bankers, 
if  the  creditor  banks  were  obliged  by  clearing-house  rules 
to  report  from  day  to  day  to  what  institutions  they  have 
loaned  their  balances,  either  in  whole  or  in  part.  Trans- 
actions of  this  kind,  it  would  seem,  ought  to  be  noted  in 
the  clearing-house  records. 

A  special  committee  has  in  charge  the  deposits  of  gold 
coin  of  member-banks  of  the  Boston  Clearing-house  as  a 
special  trust  fund,  against  which  negotiable  certificates 
are  issued.  This  fund  amounts  at  present  to  some  ten 
million  dollars,  and  certificates  to  the  same  amount  have 
been  issued  against  it. 

On  obtaining  the  written  assent  of  the  clearing-house 
committee,  members  of  the  association  are  allowed  to 
clear  for  outside  banks  and  trust  companies;  but  any 
bank,  member  of  the  association,  making  such  exchanges, 
is  liable  therefor,  and  in  the  same  manner  as  for  its  own 
exchanges  and  until  at  least  one  day's  notice  in  writing  is 
given  to  the  clearing-house  committee.  Accordingly,  in 
Boston  and  vicinity,  and  within  a  radius  of  ten  miles  from 
State  Street,  are  no  less  than  nineteen  national  banks 
and  eighteen  trust  companies  making  their  exchanges 
through  members  of  the  association,  upon  such  terms  of 
security  as  are  agreed  upon  between  them  and  the  clear- 
ing members.  Full  responsibility  for  their  acts  is  placed 
upon  the  members  through  which  they  clear. 

No  statements  whatsoever  are  required  by  the  asso- 
ciation from  such  outside  institutions,  it  being  left  wholly 


THE    BOSTON    CLEARING-HOUSE 


239 


to  the  members  to  determine  their  condition.  Members, 
however,  are  required  to  furnish  the  manager  weekly 
statements  of  condition.  An  example  of  the  form  em- 
ployed is  given  among  the  illustrations.  A  statement  is 
also  submitted  of  the  condition  of  the  associated  banks  of 


WEEKLY    STATEMENT 


Average  Condition  for  the    } 
Week    preceding    Monday,    ' 


190. 


Capital 
Stock 


Loans  and 
Discounts 


Lawful 
Money 
Reserve 


Due  from 
Other 
Banks 


Due  to 
Other 
Banks 


Deposits 


Due  by 
$. New  York,  $. 


Due  to 


.Cashier 


Form  of  Weekly  Statement  Employed  by  the  Boston  Banks. 


Boston,  as  returned  to  the  clearing-house  for  a  given 
week. 

A  comparison  of  this  statement  with  that  required 
from  the  members  at  New  York  will  show  some  interest- 
ing features,  as  well  as  some  marked  differences  in  many 
important  details.    The  Boston  banks  are  capitalized,  on 


u: 

f                     1 

2^ 

<: 

^    ^ 
1      1 

^ 

u 

(1) 

1 

1 

2 

I      1 

B 

CO 

i 

CO 

S 

:^ 

i^ 

Si 

c 

1 

I 

u 

^g 

3 

1 

4-> 

0 

ei 

i 

>> 

if 

^H 

^ 

9g 

3 



i 

0 

§ 

^ 

2 

•i 

t/) 

XS 

a 

0 

*?=; 

2 

bfi 

o 

? 

CO    . 

i 

i 

l:    i^   o 

rom  tl 
t  the 

T 

1 

o     == 

}_ 

5  ^ 

D    S 

1 

§      G 

1 

•^      2 

1 

CO 

,       1 

C3     •-. 

O       ® 

o  C 

i 

2  -S 

UJ     .B 

tj 

■ 

U 

1 

-3 

o 

o 

e 

-^  .           ' 

THE   BOSTON    CLEARING-HOUSE 


241 


the  average,  higher  than  those  in  New  York,  although 
recent  changes  in  New  York  have  caused  certain  banks 
to  take  unusual  rank  in  this  regard.     In  the  former  city 


o 
b 

o 
w 

a  O 
iCQ 

O 

o 
w 


:2:sE?!S8S8S5assss;5;s55Ssssss:s 


iJJJJJJJjJJJJJJJJJJJJJJJJJJJJ.illll|i.l.i| 
iiiiiiiiiiiiiiiiiiiiiliiliiiiiiil.iii.iii 

sis§S8iil8sli?3§S.?siaS«i22?§l2BBi.2i.?all 

iliiiiiiiiiiiliilliiiiililiiiiiliiiliii 
||||l|ijj.i.ilij.ij.lj.iijj.fli.ij.i.i.ii.ii.i.i.iiii 
litiiiiiiiiiiiiiiliiiiiliiiiiiiiiiiiiii 

S  s  s  5  5  S I  is'is'ip'ilSs  1 3I  ?'i  I  s  5'iSlj'S  II  ii  2  r  I S  B 

iiiiiiiiiiiiiiiiiiiiiiiifiiiiiiiiiiiiii 
iiiiiiiiiiiiiiiiiliiiliiiiiiiiiiiiiiiil 
iiiiiiiiiiiiiiiiiiiiliiiiiiiiiiiiiiiiii 


lllllllllllllllllllllllllllllllllllllll 

i|i|psp'|p;|i:§l§l§^^ 


:S2S5aSSS8asgSSKS  =  55$555SsS!aSS 


i|l 

I  *  i 

gas      = 


-  'it 

I'' 2  i  I 

8         I    • 
"    "  s?  ^ 

IS; 

sos  i  =:- 

i.  i^'i 
lis  1 1 1 

i     J'  II 

^  I 

|H 

?  i  s  11 

i   2  E  ll 

I  Jill 


(g 


fourteen  are  capitalized  at  one  million  dollars;  five  at 
one  million  five  hundred  thousand  dollars;  one  at  one  mill- 
ion six  hundred  thousand  dollars;  one  at  two  million  dol- 


242  CLEARING-HOUSES 

lars;  and  two  at  three  million  dollars,  making  a  total  of 
twenty-three,  or  nearly  sixty  per  cent,  of  all,  with  a  cap- 
ital of  one  million  dollars  or  more. 

It  will  be  noted,  further,  that  there  is  a  wide  difference 
in  the  items  included  in  the  two  statements.  At  Boston 
they  are  given  under  eleven  heads,  and  at  New  York 
under  seven.  .The  only  ones  in  the  New  York  statement 
not  included  in  the  same  at  Boston  are  "  Profits  "  and 
"  Bills  Payable."  "  Deposits,"  as  reported  at  New  York, 
is  given  in  Boston  under  the  two  heads  of  "  Individual 
Deposits  "  and  "  Due  to  Other  Banks."  ''  Bills  Pay- 
able," which  formerly  appeared  in  the  Boston  statement, 
has  been  omitted  for  some  two  or  three  years  past.  The 
requirement  of  the  items,  "  Due  from  Reserve  Agents," 
*'  Exchanges  for  Clearing-house,"  "  Due  from  Banks 
other  than  Reserve  Agents,"  and  "  Five  Per  Cent.  Fund," 
is  not  made  by  the  New  York  Association. 

In  addition  to  the  protection  furnished  by  these  state- 
ments, the  clearing-house  committee  is  empowered  to  ex- 
amine any  bank  belonging  to  the  association,  and  to  re- 
quire from  said  bank  securities  of  such  an  amount  and 
character  as  the  committee  may  deem  sufificient  for  the 
protection  of  the  balances  at  the  clearing-house,  when- 
ever it  shall  be  in  their  opinion  for  the  best  interests  of  the 
association.  Thus  a  member  may  be  found  to  be  weak 
and  in  danger  of  failure.  If  it  is  unable  to  pay  its  balance 
at  the  clearing-house,  these  securities  will  be  appropriated 
for  that  purpose. 

The  expense  of  printing  is  borne  equally  by  the  mem- 
bers; and  all  other  expenses  are  defrayed  by  an  annual 
assessment  of  one  hundred  and  twenty-five  dollars  upon 


THE    BOSTON    CLEARING-HOUSE  243 

each  member,  and  the  remainder  after  that  amount  pro 
rata  the  average  daily  amount  which  each  bank  has  sent 
to  the  clearing-house  during  the  preceding  year.  Upon 
each  non-member  clearing  through  the  association  an 
assessment  is  made,  in  accordance  with  a  constitutional 
provision,  as  follows:  Five  hundred  dollars  per  annum 
on  institutions  whose  capital  is  five  hundred  thousand 
dollars  or  less,  and  one  thousand  dollars  per  annum  on  all 
whose  capital  exceeds  five  hundred  thousand  dollars. 

Admissions  to  membership  may  be  made  from  time  to 
time  according  to  the  following  rule :  "  New  members 
may  be  admitted  to  the  association  on  the  recommenda- 
tion of  the  clearing-house  committee,  either  by  the  writ- 
ten assent  of  three-fourths  of  all  the  members  filed  with 
the  manager  of  the  association,  or  by  vote  of  three- 
fourths  of  all  the  members  of  the  association  at  a  meet- 
ing called  for  the  purpose,  such  new  member  paying  an 
admission  fee  of  three  hundred  and  fifty  dollars,  and  as- 
senting and  subscribing  to  these  articles."  No  require- 
ment, therefore,  is  made  regarding  minimum  capital. 

For  cause  deemed  suflficient,  any  member  may  be  ex- 
pelled from  the  association  by  a  majority  vote  of  all  the 
associated  banks.  The  constitution  declares  that  before 
withdrawal  a  member  must  pay  its  due  proportion  of  all 
expenses  for  the  current  year  and  give  three  months' 
notice  in  waiting  of  such  intention  to  the  secretary. 

In  practice,  however,  if  a  member  desiring  to  with- 
draw pays  its  expenses,  in  compliance  with  the  above  re- 
quirement, and  there  is  no  objection  on  the  part  of  the 
association,  it  may  withdraw  in  less  than  the  specified 
time,  as  was  true  of  the  Hancock  Bank,  which  withdrew 


244  CLEARING-HOUSES 

on  thirty  days'  notice.  The  power  of  suspension  is  lodged 
with  the  clearing-house  committee,  but  the  vote  of  said 
committee  must  be  unanimous  in  favor  of  such  suspen- 
sion and  must  forthwith  call  a  meeting  of  the  associa- 
tion to  take  the  matter  into  consideration. 

As  shown  before,  the  Clearing-house  Association  at 
New  York  was  the  only  one  in  America  when  the  bank- 
ers at  Boston  founded  their  clearing-house.  In  nearly 
all  the  details  of  method  and  administration,  the  rules 
established  at  New  York  were  taken  as  a  basis.  As  time 
went  by,  a  few  changes  were  found  necessary,  particularly 
in  reference  to  administration,  and  hence  it  is  un- 
necessary here  to  deal  elaborately  with  this  phase  of  the 
subject. 

The  usual  meetings  of  the  association  are  held  once 
each  year  and  at  such  other  times  as  the  clearing-house 
committee  may  designate  on  their  own  responsibility  or 
when  requested  to  do  so  by  any  five  of  the  associated 
banks.  Owing  to  the  difficulty  of  obtaining  a  quorum, 
the  required  number  was  fixed  at  one-third  instead  of 
one-half  of  all  the  members,  as  in  most  associations. 

At  each  annual  meeting  a  chairman  and  a  secretary  are 
chosen  by  ballot,  to  hold  office  for  one  year  or  until  their 
successors  are  chosen.    At  the  same  -meeting  a  nominat- 
ing committee  of  three  persons  is  selected,  whose  duty  it 
is  to  present  to  each  bank  belonging  to  the  association 
list  of  nominees  for  officers  for  the  succeeding  year,  such] 
list  to  be  presented  at  least  two  weeks  before  the  meetin| 
next  after  their  election.    A  standing  committee  of  five 
bank  presidents  or  other  directors  of  banks,  members  of 
the  association,  to  be  called  the  "  clearing-house  com- 


it 


THE   BOSTON    CLEARING-HOUSE  245 

mittee,"  is  elected  annually,  to  serve  for  one  year,  and  to 
their  care  most  of  the  important  interests  of  the  associa- 
tion are  intrusted,  as  at  New  York  and  elsewhere.  They 
appoint  the  manager,  whose  salary  is  fixed  by  the  asso- 
ciation, and  who  is  required  to  give  bond  in  the  sum  of 
ten  thousand  dollars,  such  bonds  to  be  approved  by  the 
clearing-house  committee.  The  duties  of  the  manager 
consist  in  supervising  the  exchanges  between  the  banks, 
and  the  settlements  of  balances.  He  is  in  immediate  con- 
trol of  all  the  business  transactions  of  the  clearing-house, 
discharging  all  the  duties  usually  incumbent  upon  such 
officers. 

In  another  chapter  is  given  an  account  of  the  Foreign 
Department  of  the  Boston  Clearing-house,  being  the 
outgrowth  of  an  experiment  which  was  commenced  in 
June,  1899. 


CHAPTER   XV 

FOREIGN  DEPARTMENT  OF  THE  BOSTON  CLEARING- 
HOUSE 

Organization  and  History — Regulations— Two  Clearing  Hours 
— Blanks  and  Forms — Fines — Book-keeping. 

The  Boston  Clearing-house  Association  has  had  in 
operation  for  several  months  past  a  plan  of  making 
collections  in  the  territory  naturally  tributary  to  that 
city,  but  outside  of  the  city  itself.  It  is  known  as  the 
*'  Foreign  Department  of  the  Clearing-house  Associa- 
tion," and  is  conducted  independently  of  the  regular 
clearings  of  that  organization. 

The  question  of  collecting  out-of-the-city  checks  had 
been  discussed  by  members  of  the  Boston  Clearing-house 
Association  for  a  long  time,  and  finally,  early  in  the  year 
1899,  a  special  committee  was  appointed,  to  which  the 
whole  subject  of  collecting  checks  throughout  the  dis- 
trict known  as  New  England  was  referred.  This  com- 
mittee, after  careful  deliberation,  reported  that  in  its 
judgment  it  was  advisable  and  practicable  for  the  clear- 
ing-house to  undertake  the  collection  of  such  checks  and 
to  distribute  the  proceeds  thereof.  The  committee  ad- 
vised beginning  with  the  State  of  Massachusetts,  and 
adding  the  other  New  England  States  one  by  one,  as 
soon  as  proper  provision  for  the  same  could  be  made. 

The  report  of  the  committee  further  recommended  that 

246 


THE    BOSTON    CLEARING-HOUSE 


247 


the  work  be  done  at  the  clearing-house  by  the  manager, 
under  the  supervision  of  the  clearing-house  committee. 
It  nominated  the  following  routine :  Those  banks  which 
choose  to  avail  themselves  of  this  method  of  collecting 
their  checks  shall  deposit  them  at  some  fixed  hour,  say  at 
I  o'clock,  of  each  day.  The  checks  are  then  to  be  as- 
sorted and  the  checks  on  each  out-of-town  bank  made  up 
in  a  separate  package.  To  this  package  a  slip  shall  be 
attached,  bearing  a  list  of  the  checks,  and,  further,  a  com- 
plete list  is  to  accompany  the  checks,  showing  the  total 
of  the  amount  on  each  bank  respectively.  The  clearing- 
house employees  assigned  to  that  duty  shall  send  the 
checks  forward  to  the  banks  on  which  they  are  drawn, 
so  far  as  such  banks  will  undertake  to  remit  for  checks 
on  themselves  by  drafts  on  their  Boston  or  New  York 
correspondents.  It  was  further  suggested  that  in  some 
cases  checks  on  all  the  banks  in  one  town  or  city  might 
be  collected  through  a  single  bank.  The  checks  were 
to  be  sent  by  mail  or  by  express,  as  found  desirable. 

The  report  further  set  forth  that  the  manager  of  the 
clearing-house  should  have  a  desk  and  number  assigned 
to  him,  and  should  take  part  in  the  morning  settlements, 
collecting  through  such  settlements  the  various  checks 
on  Boston  banks  received  by  him,  and  paying  in  the  same 
way  to  the  Boston  banks  their  respective  proportions  of 
the  checks  forwarded  two  days  previously,  as  might  be 
arranged.  Each  day's  settlements  by  the  manager,  the 
report  continued,  should  represent  the  amount  of  foreign 
checks  received  on  a  certain  previous  day,  and  the  debits 
and  credits  should  be  equal  in  amount.  In  case,  however, 
remittances  should  be  delayed  so  that  the  manager  was 


248  CLEARING-HOUSES 

without  suflicient  funds  to  meet  the  charges  against  him, 
he  would  charge  against  the  several  banks,  through  the 
morning  settlements,  their  respective  amounts  of  such 
delayed  remittances,  or  settle  with  the  banks  in  their 
respective  proportions  of  such  delayed  remittances  in 
the  payment  of  balances  by  the  debtor  banks  and  the 
distribution  of  balances  to  the  creditor  banks.  The 
report  was  accompanied  by  various  forms  which  were 
subsequently  adopted  for  use. 

This  report  was  approved,  and  at  a  meeting  held 
December  18,  1899,  the  following  amendment  to  the 
constitution,  which  had  been  recommended  by  the 
clearing-house  committee,  was  adopted : 

**  The  Clearing-house  Association  shall  have  the  power 
to  establish  rules  and  regulations  regarding  collections  by 
members  of  the  association,  or  banks,  or  trust  companies, 
or  others  clearing  through  such  members,  and  the  rates  to 
be  charged  for  such  collections,  and  also  to  provide  for 
the  enforcement  of  the  same.  The  association  may  from 
time  to  time  make  any  additions  to  or  changes  in  such 
rules  and  regulations  as  it  deems  judicious.  Any  rule  or 
regulation  upon  the  subject  can  be  established  only  by  a 
vote  of  the  majority  qf  all  the  members  of  the  association, 
and  when  once  established  it  shall  not  be  altered  until  it 
has  been  in  force  at  least  three  months,  and  then  only  by 
a  majority  vote  of  all  the  members  of  the  association." 

Under  this  provision  rules  and  regulations  were 
adopted  at  a  meeting  held  December  27th,  as  follows : 

"  Section  i.  These  rules  and  regulations  shall  apply  to 
all  members  of  the  association,  and  to  all  banks  or  trust 
companies  or  others  clearing  through  such  members. 


THE    BOSTON    CLEARING-HOUSE  249 

The  parties  to  which  the  same  so  apply  are  hereinafter 
described  as  collecting  banks. 

"  Section  2.  For  all  checks  and  drafts  from  whomso- 
ever received,  drawn  upon  any  New  England  bank  or 
trust  company  or  banking  house  or  other  banking  insti- 
tution, which  does  not  pay  checks  and  drafts  drawn  upon 
itself  and  sent  through  the  Boston  Clearing-house  by 
remitting  therefor  on  receipt  thereof  promptly  at  par, 
checks  upon  some  member  of  the  Boston  or  New  York 
Clearing-house,  or  upon  a  banking  institution  clearing 
through  some  such  member,  the  collecting  banks  shall, 
charge  not  less  than  one-tenth  of  one  per  cent,  of  the 
amount  of  such  checks  and  drafts  respectively. 

"  Section  3.  In  case  the  charge  upon  any  check  or 
draft  at  the  rate  above  specified  does  not  equal  ten  cents, 
the  collecting  bank  shall  charge  not  less  than  that  sum; 
but  all  checks  and  drafts  received  from  any  one  depositor 
or  correspondent  on  the  same  day,  and  payable  by  the 
same  institution,  may  be  added  together  and  treated  as 
one  item  for  the  purpose  of  fixing  the  amount  to  be 
charged. 

"  Section  4.  The  charges  herein  specified  are  in  all 
cases  to  be  collected  at  the  time  of  deposit  or  not  later 
than  the  tenth  day  of  the  following  calendar  month. 
No  collecting  bank  shall  directly  or  indirectly  allow 
any  abatement,  rebate,  or  return,  for  or  on  account 
of  such  charges,  or  make  in  any  form  any  compensation 
therefor. 

"  Section  5.  In  case  any  member  of  the  association 
shall  learn  that  these  rules  and  regulations  have  been 
violated  by  any  of  the  collecting  banks,  it  shall  imme- 


250  CLEARING-HOUSES 

diately  report  the  facts  to  the  chairman  of  the  clearing- 
house committee,  or,  in  his  absence,  to  the  manager  of  the 
clearing-house.  Upon  receiving  information  from  any 
source  that  there  has  been  a  violation  of  the  same,  said 
chairman,  or,  in  his  absence,  said  manager  shall  call  a 
meeting  of  the  committee.  The  committee  shall  investi- 
gate the  facts  and  determine  v^hether  a  formal  hearing  is 
necessary.  In  case  the  committee  so  concludes,  it  shall 
instruct  the  manager  to  formulate  charges  and  present 
them  to  the  committee.  A  copy  of  the  charges,  together 
with  written  notice  of  the  time  and  place  fixed  for  hearing 
regarding  the  same,  shall  be  served  upon  the  collecting 
bank  charged  with  such  violation,  which  shall  have  the 
right  at  any  hearing  to  introduce  such  relevant  evidence 
and  submit  such  argument  as  it  may  desire.  The  commit- 
tee shall  hear  whatever  relevant  evidence  may  be  offered 
by  any  person  and  whatever  arguments  may  be  submit- 
ted, and  shall  determine  whether  the  charges  are  sus- 
tained. In  case  it  reaches  the  conclusion  that  they  are,  the 
committee  shall  call  a  special  meeting  of  the  association 
and  report  thereto  the  facts  with  its  conclusions.  If  the 
report  of  the  committee  is  approved  by  the  association, 
the  collecting  bank  charged  with  such  violation  shall  pay 
to  the  association  the  sum  of  one  thousand  dollars;  and 
in  case  of  a  second  violation  of  these  rules  and  regula- 
tions, any  collecting  bank  may  also,  in  the  discretion  of 
the  association,  be  excluded  from  using  its  privileges 
directly  or  indirectly,  and,  if  it  is  a  member,  expelled 
from  the  association. 

'*  Section   6.    Every   collecting   bank,   as   defined   in 
Section  i  of  these  rules  and  regulations,  shall  forthwith 


THE    BOSTON    CLEARING-HOUSE  251 

adopt,  by  its  board  of  directors,  a  resolution  in  the  fol- 
lowing terms,  and  file  a  certified  copy  thereof  with  the 
association  as  evidence  as  therein  specified : 

"  Whereas,  This  corporation  has  acquired  the  privilege 
of  clearing  and  making  exchange  of  its  checks  through 
the  Boston  Clearing-house  Association,  and  is  subject 
to  its  rules  and  regulations,  now,  therefore, 

"  Be  it  Resolved,  That  this  corporation  hereby  in  all  re- 
spects assents  to  and  agrees  to  be  bound  by  and  to  com- 
ply with  all  rules  and  regulations  regarding  collections 
outside  of  the  city  of  Boston  which  may  be  established 
pursuant  to  the  constitution  of  said  association,  and  that 
the  president  of  this  corporation  is  hereby  instructed  to 
file  a  certified  copy  of  this  resolution  with  the  Clearing- 
house Association  as  evidence  of  such  assent  and  agree- 
ment on  the  part  of  this  corporation." 

It  was  provided  that  the  above  should  go  into  effect 
on  January  i,  1900.  In  putting  the  plan  into  operation, 
the  manager  of  the  clearing-house  prepared  two  lists  of 
banks,  one  comprising  those  banks  the  location  of  which, 
with  respect  to  the  closing  of  mails,  etc.,  required  that 
checks  should  be  deposited  with  the  manager  not  later 
than  I  o'clock,  and  the  other  permitting  the  deposit  of 
checks  not  later  than  3  o'clock  of  each  business  day,  in 
order  to  be  got  into  the  mail  of  the  same  day.  This 
resulted  in  what  is  in  effect  two  clearing  hours  for  the 
foreign  department.  Saturdays  are  exceptions  to  the 
general  rule,  and  with  respect  to  that  day  it  is  pro- 
vided that  all  checks  shall  be  deposited  not  later  than 
I  o'clock. 

The    regulations    for   the    collection    of   out-of-town 


252  CLEARING-HOUSES 

checks,  formulated  by  the  manager  of  the  clearing-house, 
include  the  following : 

Every  check  must  be  stamped  by  the  bank  depositing 
it,  according  to  the  following  form : 


Received     payment     through     the 

Boston  Clearing-house. 
Prior  indorsements  guaranteed. 

Bank 

of  Boston 

by 

Cashier. 


The  checks  on  each  bank  must  be  placed  in  a  separate 
package,  with  a  slip  attached  containing  a  list  of  the 
checks,  the  name  of  the  bank  on  which  they  are  drawn, 
and  a  footing;  and  the  check  ticket  attached  to  the  slip 
also  must  be  filled  out  and  the  name  of  the  bank  and  the 
footing  of  the  checks  placed  thereon.  Whenever  there  is 
but  one  check  on  a  bank  it  will  still  be  necessary  to  have 
the  'clearing-house  slip  attached,  with  the  name  of  the 
bank  and  the  amount  of  the  check  placed  upon  both  slip 
and  check  ticket.  These  packages  must  be  assorted 
alphabetically,  according  to  the  names  of  the  respective 
towns  in  which  the  banks  are  situated,  and  must  be  de- 
livered by  the  messengers  of  the  banks  at  the  proper 
desks  for  the  respective  letters. 

By  I  o'clock  P.M.  on  Saturdays,  and  on  other  days 
before  half-past  3  o'clock  p.m.,  each  bank  must  send  to 
the  clearing-house,  by  its  messenger,  a  ticket  showing  the 
total  amount  of  checks  left  for  collection  that  day,  and  re- 


•s 

^ 

CO 

d 

Z 

0) 

W 

=%^ 

^           u 

3 

0 

^ 

<L 

c 

bo 

.5 

■ 

^ 

-4— 

£ 

k4 

h- 

c4 

c 

< 

o 

z 

^ 

c 
o 

d 
o 

< 

Q. 
LU 

1 

s 

d 

0 

r-H 

O 
Z 

1 

.c 

' 
1 

c 

0 

UJ 

^ 

1 
> 

■Jiff 

c: 

o 

Li. 

§ 

i 

at 

0 

b 

* 

< 
<  ■ 

<u 

bo 

+J 

<L 

• 

(Z) 

! 

<-• 

0 

1 

LU 

PQ 

u 

'C 

I 

c 

c^ 

bi) 

c 

< 

UJ 

I 

^ 

K 

<u 

O 
lu 

Z 

254  CLEARING-HOUSES 

ceive  a  charge  ticket  showing  the  date  on  which  it  is  to 
be  charged  into  the  regular  morning  settlements  against 
the  manager.  The  manager  will  be  known  as  No.  lOO, 
and  will  join  in  the  settlements  on  the  same  footing  as 
any  one  of  the  banks. 

Banks  are  requested  to  see  that  all  indorsements  are  in 
order.  No  examination  of  packages  or  checks  will  be 
made  by  the  officers  or  employees  of  the  clearing-house. 

If  the  remittance  from  any  Massachusetts  bank  shall 
not  have  been  received  on  the  morning  on  which  the 
charge  tickets  are  to  be  charged  against  the  manager  of 
the  clearing-house,  the  manager  will  charge  against  each 
Boston  bank  its  proportionate  amount  of  such  delayed 
remittance,  as  well  as  the  amount  of  any  protested  or 
unpaid  checks  received  from  any  Boston  bank. 

New  York  exchange  and  currency  received  in  pay- 
ment of  collections  will  be  charged  at  par  against  the  sev- 
eral Boston  banks  from  time  to  time,  under  the  direction 
of  the  clearing-house  committee,  in  proportion  to  the 
business  of  each  bank,  and  the  amounts  of  any  such 
charges  will  be  reported  to  the  president,  cashier,  or 
other  representative  of  each  bank  at  the  lo  o'clock 
clearing. 

A  fine  of  two  dollars  will  be  collected  from  any  bank 
which  is  late  at  either  the  i  o'clock  or  the  3  o'clock  set- 
tlement, and  its  checks  may  be  refused  by  the  manager  at 
his  discretion  if  presented  more  than  ten  minutes  late. 
Any  bank  not  sending  to  the  manager  of  the  clearing- 
house by  I  o'clock  on  Saturdays,  and  on  other  days  be- 
fore half-past  3  o'clock,  a  ticket  showing  the  total  amount 
of  out-of-town  checks  it  has  deposited  at  the  clearing- 


i 

FOREIGN   SLIP 

Bank  - 

Location  

FROM 

Date  


FOREIGN   CHECK   TICKET 

FROM 

Date  

Bank  - 

Location 

$ 


1 1 1 


DO  NOT  DETACH 


Form  of  Foreign  Slip  and  Foreign  Check  Ticket,  Boston  Clearing-house. 


256  CLEARING-HOUSES 

house  that  day,  will  be  fined  four  dollars.  A  fine  of  four 
dollars  also  will  be  imposed  for  any  mistake  in  the 
amount  of  such  deposit  so  reported.  An  incomplete  or 
incorrectly  filled  slip  or  check  ticket  is  fined  one  dollar. 

The  forms  used  by  the  foreign  department  of  the  Bos- 
ton Clearing-house — in  fact,  the  actual  stationery — have 
been  largely  borrowed  from  the  forms  employed  in  the 
regular  clearings.  Minor  adaptations  have  been  made  in 
certain  forms,  and,  in  cases  where  absolutely  necessary, 
new  forms  have  been  designed  and  printed.  The  deposit 
ticket,  a  sample  of  which  is  shown  among  the  illustra- 
tions, contains  little  more  than  the  name  of  the  bank 
making  the  deposit,  the  date,  and  the  amount  of  checks 
left  for  collection.  The  receipt  corresponding  to  this, 
which  is  also  reproduced  among  the  illustrations,  is  like- 
wise very  simple  in  its  details.  There  is  the  name  of  the 
bank,  the  reported  amount  of  the  checks,  the  date  at 
which  the  amount  is  payable,  if  the  checks  prove  good, 
and  the  signature  of  the  manager. 

The  detailed  statements  of  checks  deposited  for  collec- 
tion, known  as  foreign  slips,  a  sample  of  one  of  which  is 
shown  herewith,  are  of  different  colors  of  paper,  thereby 
readily  distinguishing  the  items  of  one  State  from  those 
of  another.  Rhode  Island,  for  example,  is  straw  color, 
Connecticut  blue,  etc.  This  slip  gives  the  name  and  the 
location  of  the  bank  on  which  the  checks  are  drawn,  and 
the  name  of  the  bank  depositing  them  for  collection. 
There  is  a  coupon  at  the  bottom  which  recounts  the  name 
of  the  bank  making  the  deposit,  the  date,  the  name  of  the 
bank  on  which  the  checks  are  drawn,  its  location,  and  the 
amount. 


ll 


o 
o 


o 

2 


0 

(/) 

;3 
0 

C 

•T-t 

u 

Q 

1— I      z 

O    2 

^^         UJ 

cc: 

C    2 

0 

+j 

0 


I- 
< 

UJ 

o 


T3 

o 


> 

CT3 


r3 


t/) 

<u 

*:ii 

o 

c 
o 

CJ 

TD 

T3 

C 

O 

h 

Tjo 

^^— 1 

ci 

c 

a 

UJ 

<Lt 

Xi 

x: 

^ 

^ 

^ 

«u 

c^ 

^.^ 

^ 

Ou 

o 

& 


258  CLEARING-HOUSES 

The  letter-form  used  in  transmitting  the  checks  for  col- 
lection to  the  several  banks  on  which  they  are  drawn,  is 
presented  among  the  illustrations.  In  the  blank  space 
below  the  signature  of  the  manager  the  footings  of  the 
several  slips  prepared  by  the  banks  are  inserted.  As 
this  account  is  made  up,  the  stubs  from  the  foreign  slip 
tickets  (see  previous  illustration),  being  that  part  desig- 
nated as  the  foreign  check  ticket,  is  detached  and  is 
retained  by  the  clearing-house  manager  as  evidence  of 
the  amount  that  is  inserted  in  the  letter.  The  coupon 
at  the  bottom  of  the  letter  itself  is  likewise  retained  for 
book-keeping  purposes  and  is  the  basis  for  charging 
the  account  with  the  bank.  The  amount  represented 
by  it  is  the  aggregate  of  all  of  the  stubs  of  the  slips 
enclosed  with  the  letter. 

For  the  purpose  of  making  up  the  accounts — that  is, 
filling  out  the  letters  of  transmission  apd  otherwise  com- 
pleting the  work — a  number  of  Burroughs's  arithmom- 
eters are  employed.  In  other  words,  the  machine  that  is 
largely  in  use  among  banks  throughout  the  United  States 
for  listing  vouchers  returned,  etc.,  is  used  in  making  up 
the  records  of  remittances.  Enough  of  these  machines 
are  used,  and  so  skilful  are  the  employees  in  their  manipu- 
lation of  them,  that  in  a  surprisingly  short  period  of  time 
after  the  exchanges  have  been  completed,  the  lists  for  the 
individual  banks  are  made  up  and  the  matter  got  into 
the  mails  or  the  hands  of  the  express  companies,  as  the 
case  may  be.  ■ 

The  settling  clerk's  statement,  also  shown  in  the  illus- 
trations, has  four  columns.  The  first  records  the  receipts 
from  correspondents,  the  second  column  contains  the 


I 


C.  A.  RUGGLES,  Manager. 

BOSTON    CLEARING-HOUSE. 

.  Boston, 

To  the  Cashier  of  the 

National  Bank  of. 

Dear  Sir : 

Enclosed  I  beg  to  band  j'ou  checks  on  your  bank  as  listed  below, 
for  the  amount  of  which  please  remit  me  by  return  mail  a  draft  on 
jyour  Boston  correspondent,  payable  to  the  order  of  the  Manager  of 
the  Boston  Clearing-house. 

At  the  same  time,  if  for  any  reason  a  check  remains  unpaid, 
please  advise  me  of  the  amount  of  such  check  and  the  name  of  the 
Boston  Bank  whose  indorsement  appears  thereon. 

Yours  truly,  C.  A.  RUGGLES,  Manager 


.« National  Bank 

Datey Amount,  $■- 


Form  of  Letter  of  Transmission  to  Correspondents,  Foreign  Department, 
Boston  Clearmg-house. 


26o  CLEARING-HOUSES 

amounts  from  members  receipted  for,  the  third  records 
the  adjustments,  borrowings,  etc.,  and  the  fourth  the  pay- 
ments. This  sheet  in  use  is  of  the  conventional  size,  with 
the  names  of  the  br.nks  printed  down  the  left-hand  mar- 
gin and  numbered,  and  corresponding  numbers  placed 
at  the  ends  of  the  lines  on  the  right-hand  margin. 

The  book-keeping  employed  in  the  foreign  department 
of  the  Boston  Clearing-house  is  very  simple  in  character. 
The  outward  posting  mediums,  as  already  explained,  are 
the  stubs  of  the  letters.  The  inward  posting  mediums  are 
the  letters  from  the  out-of-town  banks  enclosing  remit- 
tance checks.  Of  necessity,  an  account  is  opened  with 
each  bank  to  which  collections  are  forwarded.  At  the 
outset  it  is  charged  with  the  amounts  sent  to  it  for  col- 
lection, and  in  turn,  as  remittances  are  received,  it  is 
credited. 

With  respect  to  the  inward  posting  mediums,  it  some- 
times transpires  that  the  banks  making  returns  send  back 
the  original  letter  enclosing  collections.  This,  of  course, 
answers  every  purpose  in  the  clearing-house. 

The  ledger  at  present  in  use  has  the  names  of  the 
various  out-of-town  banks  printed  down  the  left-hand 
margins  of  the  page,  there  being  a  line  to  each.  There  is 
a  debit  and  a  credit  column  for  each  day  occupying  the 
space  to  the  right  of  the  names.  The  ledger  is  similar  in 
form  to  certain  varieties  of  deposit  ledgers  in  use  among 
banks,  and  is  of  a  variety  that  is  sometimes  described  as  a 
progressive  ledger.  As  already  mentioned,  the  banks 
are  debited  with  the  items  sent  out  and  credited  with  the 
remittances.  The  debits,  of  course,  precede  the  credits 
by  one,  two,  three  or  four  days,  according  to  the  location 


1 

a 

V 

s 

4-1 

CO 

O 

4-t 

<u 

CO 

o 

z 

- 

<M       CO       '<*<       lO 

c 

i 

if 

'■d'2 

<  5 

m 

It 

< 

E  c 

It 
-5 

z 
< 

CD 

1 

1 

National  Union 
Old  Boston  Nat. 
State  National 
New  England  Nat. 

o 

Z 

tH 

<M       CO       "^       lO 

s  g  g 

1 

i 

< 

Winthrop  Nat. 
Mechanics  Nat. 
Commercial  Nat. 

g    g    § 

u 


262  CLEARING-HOUSES 

of  the  banks.  Wherever  the  remittances  come  in 
promptly,  the  columns,  taking  the  banks  collectively  on 
a  page,  balance.  Wherever  one  or  more  remittances  are 
delayed,  the  columns,  of  course,  are  out  of  balance,  there- 
by directing  attention  instantly  to  the  delinquent. 


CHAPTER   XVI 

THE  CHICAGO   CLEARING-HOUSE 

Date  and  History  of  Formation — Methods  of  Exchange — Pre- 
liminary Exchanges  among  Members  —  Kinds  of  Money 
Employed  in  Settling  Balances— Trading  Balances— Non- 
member  Banks  that  Clear  —  Statements  of  Condition  — 
Expenses  and  Fines— Admissions  and  Expulsions — Volume 
of  Clearings — Administration. 

The  practical  utility  of  clearing-houses  had  been  at- 
tested in  the  United  States  by  more  than  ten  years  of 
successful  operation,  when  Chicago,  in  April,  1865, 
formed  an  association,  on  lines  substantially  identical 
with  those  of  the  leading  cities  of  the  East.  Although 
the  Chicago  Clearing-house  performs  essentially  the 
same  functions  as  do  the  clearing-houses  of  other  im- 
portant centres,  yet,  in  the  course  of  time,  circumstances 
have  wrought  many  changes  in  its  constitution,  which 
have  tended  to  give  it  a  character  peculiarly  its  own. 
The  membership  (now  nineteen  in  number)  at  the  date 
of  the  organization  embraced  nearly  all  the  banks  and 
bankers  in  the  city.  Although  at  one  time  the  list  went 
up  to  thirty,  there  are  at  the  present  time  only  nineteen 
members,  the  vicissitudes  of  the  banking  business  in 
Chicago  in  the  interval  accounting  for  the  increase  and 
subsequent  decrease.  The  membership,  as  at  present 
made  up,  embraces  thirteen  national  banks,  four  trust 

263 


264  CLEARING-HOUSES 

companies,  one  State  bank,  and  the  Chicago  branch  of 
the  Bank  of  Montreal. 

The  requirements  for  membership  at  the  outset  were 
riot  so  rigid  as  they  are  at  present.  No  minimum  limit 
was  placed  upon  the  capital  necessary  for  membership. 
As  a  fact,  many  of  the  members  had  but  small  capital 
and  limited  experience.  Further,  at  that  stage  of  the 
development  of  the  clearing-system,  experience  did  not 
demand  what  has  since  been  found  to  be  very  essential. 

The  Chicago  Clearing-house  progressed  with  uniform 
success  from  the  date  of  its  organization  in  1865  until 
1 87 1,  when  all  the  interests  of  the  city  sustained  a  severe 
shock  by  the  great  fire  which  swept  over  the  city.  In 
that  fire  some  portion  of  the  records  of  the  clearing-house 
was  lost.  Soon  after  the  fire  the  panic  of  1873  occurred, 
and  in  that  crisis  a  number  of  the  members  fell  out  of 
line.  Still  other  vicissitudes,  some  of  which  were  pecul- 
iar to  the  organization  itself,  served  still  further  to  retard 
its  growth  and  progress.  In  1882  the  Chicago  Clearing- 
house was  formally  incorporated  under  the  laws  of  the 
State. 

The  failure  of  members  in  this  organization  has  never 
given  occasion  for  litigation.  Those  members  who  have 
been  so  unfortunate  as  to  fail  have  seldom  attempted  to 
clear  on  the  day  of  their  failure.  In  most  cases  they  have 
given  notice  of  their  condition  in  ample  time  for  their  ex- 
change to  be  withdrawn.  When,  however,  a  failing  bank 
has  attempted  to  make  its  regular  clearings  and  has  not 
been  able  to  pay  the  balance  against  it  at  the  clearing- 
house, all  the  exchanges  presented  by  and  against  it  have 
been  returned  and  a  new  settlement  made,  the  same  as  if 


THE   CHICAGO   CLEARING-HOUSE  265 

it  had  not  participated  in  the  exchanges  of  the  day.  In 
this  way  those  who  had  presented  checks  against  the  fail- 
ing member  were  enabled  to  return  them  to  their  custom- 
ers, thereby  intrenching  themselves  against  loss.  No 
formal  provision  was  made  for  such  action  at  the  outset, 
but  as  time  passed  on,  this  course  was  found  to  be  the 
best  means  by  which  to  avoid  serious  complications.  Ac- 
cordingly, the  rule  has  been  embodied  in  the  constitu- 
tion. It  is  similar  in  its  provisions  to  that  existing  in  the 
constitutions  of  nearly  all  the  clearing-house  associations 
of  the  country. 

The  history  of  this  organization  shows  comparatively 
few  failures.  The  membership,  however,  has  been  re- 
peatedly reduced  by  consolidations. 

We  now  come  to  an  analysis  of  the  methods  of  ex- 
change pursued  by  this  body,  and,  as  we  proceed,  we 
shall  find  that  in  these  details,  Chicago,  quite  as  much  as 
any  of  the  larger  cities  of  the  East,  presents  certain  strik- 
ing features  of  its  own,  which  are  not  to  be  found  in  the 
others. 

The  exchanges  in  Chicago  are  made  on  each  business 
day,  at  1 1  o'clock,  except  Saturday,  when  they  are  made 
at  10  o'clock.  For  some  time  past  a  large  rented  room  on 
Monroe  Street,  being  in  the  basement  of  the  building  of 
the  First  National  Bank,  has  been  occupied.  New  quar- 
ters, however,  at  the  date  that  this  account  is  written,  are 
in  process  of  construction  and  are  to  be  occupied  in  May, 
1900. 

The  clearing-room  is  fitted  with  two  rows  of  desks, 
extending  lengthwise  of  the  space.  One  of  these  is 
assigned  to  each  of  the  member-banks  and  is  desig- 


266  CLEARING-HOUSES 

nated  by  a  number.  The  manager  sits  at  a  desk  at  the 
end  of  the  room,  where  he  commands  a  full  view  of  the 
clearing  operations.  Each  bank  sends  from  two  to 
three  representatives  to  the  clearing-house,  with  its 
claims  separately  made  out  against  each  of  the  other 
members.  One  of  the  representatives  of  each  bank 
stations  himself  immediately  opposite  the  desk  bearing 
the  number  of  his  bank,  first  having  deposited  with  the 
manager  a  ticket  which  states  the  amount  of  the  ex- 
changes that  his  bank  has  sent  to  the  clearing-house. 
On  receipt  of  the  ticket,  the  manager  immediately 
enters  in  the  credit  column  of  the  sheet  before  him  the 
amount  stated  thereon.  This  sheet  is  ruled  in  four 
columns,  for  the  entry  of  the  credit  and  debit  ex- 
changes and  for  showing  the  credit  and  debit  balances. 
Standing  in  front  of  each  of  the  representatives  of  the 
banks  above  mentioned  is  the  messenger  from  the  same 
bank,  with  a  bundle  of  exchanges  ready  to  be  delivered 
at  the  desk  of  each  of  the  other  banks. 

Precisely  at  1 1  o'clock,  or  as  soon  as  all  are  present,  a 
gong  is  struck,  and  thereupon  the  messengers  begin  the 
delivery  of  the  checks,  passing  around  the  double  row  of 
desks  and  depositing  with  the  clerk  of  each  of  the  banks 
the  exchanges  drawn  upon  it.  While  delivering  the 
checks  the  messenger  passes  from  clerk  to  clerk  a  sheet 
containing  the  amounts  to  the  debit  of  each,  and  upon 
this  the  several  clerks  receipt  for  the  checks  they  receive. 

When  the  packages  have  all  been  delivered  and  re- 
ceipted for,  they  are  taken  to  the  several  banks  by  mes- 
sengers, the  sheets  being  passed  around  by  other 
messengers,  who,  with  the  clerks,  remain  at  the  clear- 


THE   CHICAGO   CLEARING-HOUSE  267 

ing-house.  As  the  sheets  are  thus  being  passed  along, 
each  clerk  enters  the  amount  charged  to  his  bank  on 
the  debit  side  of  the  page,  in  a  book  which  he  has 
brought  with  him  for  that  purpose. 

These  books  are  ruled  in  four  columns,  for  the  entry 
of  the  amount  brought,  the  amount  received,  the  credit 
balance,  and  the  debit  balance,  respectively.  One  column 
is  filled  out  before  the  messenger  comes  to  the  clearing- 
house, and  that  is  the  amount  brought,  or,  as  described 
above,  the  credit  column. 

When  the  debit  entries  have  all  been  made  from  the 
sheets,  the  balance  is  struck  by  taking  the  difference  be- 
tween the  total  of  the  amount  brought  and  the  amounts 
received.  Each  clerk  now  makes  out,  as  quickly  as 
possible,  a  ticket  showing  the  total  amount  brought,  the 
amount  received,  and  the  balance,  and  hands  the  same 
to  the  manager. 

It  is  clear  in  each  case  that  if  the  amount  brought 
exceeds  the  amount  received,  the  balance  will  be  in  his 
favor  and  vice  versa.  The  manager,  upon  receiving  these 
tickets,  immediately  enters  the  amounts  in  the  debit  col- 
umn of  his  sheet,  and  the  balances  shown  in  the  credit 
column  in  the  credit  balance  column,  or  the  debit  balance 
column,  as  the  case  may  be.  It  now  remains  to  foot  up 
the  columns.  If  the  amounts  brought  and  the  amounts 
received  agree,  and  if  the  debit  and  credit  balances  like- 
wise agree,  the  manager  announces  that  the  work  is  cor- 
rect, and  thereupon  the  several  clerks  immediately  re- 
turn to  their  banks.  If,  on  the  other  hand,  these  amounts 
do  not  agree,  the  discrepancy  is  announced  by  the  man- 
ager, whereupon  the  clerks  proceed  to  search  for  the 


268  CLEARING-HOUSES 

error.  A  search  of  this  kind  requires  skill  and  accuracy 
at  figures,  for  it  is  frequently  necessary  to  foot  up  long 
columns  of  figures  and  even  to  call  back  the  entries  be- 
tween banks,  in  order  to  locate  the  error.  If  the  mistake 
is  not  soon  found,  the  anxiety  becomes  apparent,  for  a 
fine  of  two  dollars  is  imposed  upon  the  unfortunate  mem- 
ber whose  error  has  caused  the  trouble,  if  the  mistake  is 
not  located  in  twenty  minutes. 

The  custom  of  exchanging  checks  and  other  items 
among  themselves,  before  the  hour  for  exchanging  at  the 
clearing-house,  has  grown  up  among  the  members  of  this 
organization.  For  example,  members  A,  B,  C,  and  D 
may  be  located  in  close  proximity.  Therefore,  for  con- 
venience in  making  early  entries  of  items,  they  exchange 
among  themselves  the  checks  which  they  hold  against 
each  other.  The  settlement  of  balances  arising  in  this 
way  is  made  at  the  same  time  and  in  the  same  manner  as 
if  the  exchanges  had  taken  place  at  the  clearing-house. 

All  banks  which  find  themselves  debtors  in  the  ex- 
changes are  allowed  from  12  to  12.30  o'clock  to  settle 
their  balances  with  the  manager  at  the  clearing-house. 
The  creditor  banks  receive  their  balances  between  12.30 
and  12.45  o'clock.  On  Saturdays  these  transactions  are 
one  hour  earlier. 

The  method  of  settlement  in  Chicago  dififers  materially 
from  that  which  prevails  in  New  York,  Boston,  and  Phil- 
adelphia, and,  indeed,  from  that  of  all  other  important 
clearing-houses  in  this  country.  Less  than  twenty-five 
per  cent,  of  the  balances  are  settled  with  currency  and 
gold  coin.  The  latter  is  used  only  to  a  very  limited 
extent 


THE   CHICAGO   CLEARING-HOUSE  269 

The  following  is  the  substance  of  the  By-law  of  this 
organization  relating  to  kinds  of  money  to  be  used  in 
settlement  of  balances,  as  amended  in  October,  1899: 

All  payments  to  the  Chicago  Clearing-house,  by  the 
different  members  of  said  association,  shall  be  made  in 
United  States  gold  coin,  or  United  States  treasury  cer- 
tificates therefor  payable  in  Chicago,  in  United  States 
legal  tender  notes,  or  treasury  notes,  or  United  States 
treasury  certificates  therefor  payable  in  Chicago,  in 
United  States  silver  certificates  or  national  bank-notes. 

All  gold  paid  to  the  clearing-house  in  settlement  of 
balances  shall  be  put  up  in  strong  canvas  bags,  each  con- 
taining five  thousand  dollars;  all  coins  in  any  one  bag  to 
be  full  weight  and  of  one  denomination;  the  bags  to  be 
securely  fastened  by  wire,  with  a  lead  seal  bearing  the 
name  and  clearing-house  number  of  the  member  putting 
up  such  package,  in  such  manner  that  in  the  opinion  of 
the  manager  of  the  clearing-house  the  fastenings  cannot 
be  sufficiently  released  to  allow  of  the  removal  of  any  of 
the  contents  without  mutilating  the  seal.  Every  such 
package  shall  have  a  suitable  label  or  tag  attached,  bear- 
ing the  name  of  the  sealing  member,  the  amount  of  the 
contents,  denomination,  date  of  sealing,  and  signature  of 
the  person  or  persons  duly  authorized  to  date  or  seal  the 
same. 

All  currency  paid  to  the  clearing-house  in  settlement  of 
balances,  except  notes  of  the  denomination  of  fifty  dollars 
or  larger,  shall  be  put  up  in  packages,  each  containing 
five  thousand  dollars  or  ten  thousand  dollars.  All  the 
notes  included  in  any  package  shall  be  of  one  denomi- 
nation, enclosed  in  bands  in  multiples  of  five  hundred 


270  CLEARING-HOUSES 

dollars  each.  The  denomination  and  amount  shall  be 
plainly  marked  on  the  cover  of  the  package,  with  the 
name  of  the  member  of  the  association  putting  up  the 
same,  date  of  sealing,  and  signature  of  the  person  or 
persons  duly  authorized  to  date  or  seal  the  same.  Every 
such  package  shall  be  enclosed  between  cardboards  of 
the  full  width  and  length  of  the  notes,  placed  on  the 
upper  and  lower  sides  thereof,  and  shall  be  tied  with 
twine  and  securely  sealed  with  wax  seals  bearing  the 
imprint  of  the  member  putting  up  the  same.  All  notes 
included  in  such  package  shall  be  in  good  condition  and 
fit  for  circulation  and  of  the  denomination  for  either  five 
dollars,  ten  dollars,  or  twenty  dollars. 

For  each  and  every  violation  of  any  of  the  regulations 
contained  in  the  paragraphs  relating  to  gold  and  currency 
above,  the  manager  shall  impose  a  fine  of  five  dollars  on 
the  offending  member. 

The  value  of  every  package  of  gold  or  currency  put  up 
in  accordance  with  the  provisions  of  this  By-law  shall  be 
guaranteed  by  the  member  whose  seal  it  bears,  until  and 
including  the  fifteenth  day  of  March,  June,  September,  or 
December,  whichever  month  shall  come  next  after  its 
authorized  date,  or  re-date,  and  in  case  of  any  shortage, 
either  in  count  or  weight,  the  member  putting  up  the 
same  shall  on  demand  immediately  make  good  any  such 
shortage  to  the  member  breaking  the  seal.  This  guar- 
antee shall  not  extend  to  any  package  which  shall  have 
passed  into  the  hands  of  any  person  or  corporation  not 
a  member  of  the  association. 

Chicago  has  developed  a  peculiar  custom  of  trading 
balances,  and  so  extensive  has  this  practice  become  that 


REPORT  TO   MANAGER 
0,  H.  Bank  No 

TRADES   WHOLE    BALANCE. 

PAYS   IN    $ 

COLLECTS   $ 


REPORT  TO   BANK 
C.  H.  Bank  No. 


DR.  BAL.  $ 
CR.       "       $ 


Forms  of  Reports  Used  in  Trading  Balances. 


272  CLEARING-HOUSES 

perhaps  seventy-five  per  cent,  of  the  balances  are  disposed 
of  in  this  way.  It  began  many  years  ago,  and  originated 
in  a  desire  to  avoid  the  counting  and  carrying  of  so  much 
money  through  the  streets  as  would  be  necessary  to  settle 
the  balances.  The  trading  is  done  mainly  by  the  clerks 
at  the  clearing-house.  As  soon  as  they  strike  their  bal- 
ance, and  while  the  manager  is  entering  upon  his  sheet 
the  amounts  and  balances,  and  footing  the  columns,  the 
clerks  representing  the  creditor  banks  engage  in  loaning 
balances  to  the  representatives  of  the  debtor  banks. 
The  clerks  are  not  given  full  liberty  of  action,  but  are 
very  generally  instructed  by  their  banks  regarding  the 
amounts  to  be  traded  and  the  members  with  which  trades 
may  be  made.  Any  member  may  trade  its  whole  balance, 
or  any  part  thereof.  It  may  trade  its  balance  to  a  single 
member,  or  to  two  or  more  members. 

A  notable  example  of  this  kind  occurred  in  August, 
1897,  when  the  North  Western  National  Bank  traded  its 
balance  to  fifteen  diflferent  banks.  The  credit  balance  of 
this  bank  was  two  million  six  hundred  and  twenty-two 
thousand  dollars,  which  amount  was  more  than  ninety- 
eight  per  cent,  of  the  credit  balance  of  all  the  banks,  there 
being  on  that  day  only  two  other  creditor  banks  out  of  the 
whole  list  of  twenty-two  members. 

Some  banks  do  not  find  it  to  their  advantage  to  trade, 
and  hence  adjust  their  balances  by  cash  settlements.  At 
the  conclusion  of  the  trades,  the  representatives  of  the 
banks  make  out  and  hand  to  the  manager  reports  of  the 
tradings,  as  shown  by  the  accompanying  form.  This 
form,  it  will  be  noticed,  is  provided  with  a  coupon  which 
embodies  a  report  to  the  bank. 


,      -       .    1 

OO 

^ 

C3 

oi 

cr^ 

^^ 

U 

CO 

o 

5 

C/3 

i      Q 

i                : 

< 

•» 

i 
• 

0^ 

i 
I 

t/3 

i 

S 

^ 

! 
t                     1 

O 

u^ 

i 

r 

0) 

-a 

O 

i 

i 

a 

o 

1 

o 

z 

S 

15 

< 

: 

>. 

O 

! 

.S2 

o 

i_i 

o 

o 

T3 

IS 

< 

H 

E 

i 

\?. 

o 

i 

8 

d    '-' 

i 
i 

Z       Q 

i 
i 
I 

< 

1 

T3 

^ 

■>              1 

"T3 

CQ 

Q- 

1 

^  OF    THK  '^ 

UNIVFRBTTY 


274 


CLEARING-HOUSES 


The  formal  order  by  which  the  transfer  is  made  is  shown 
in  the  second  of  the  accompanying  forms.  Manifestly,  it 
would  be  impossible  for  the  manager  of  the  clearing- 
house to  ascertain  from  the  reports  just  illustrated 
whether  a  given  bank  had  traded  to  a  single  bank  or  to  a 
number  of  banks,  and  also  with  what  bank  or  banks  the 
trade  had  been  negotiated.  This  fact  is  determined  by  an 
order  or  orders  upon  the  manager  of  the  clearing-house 
from  the  cashier  of  each  creditor  bank  which  has  nego- 
tiated a  trade,  to  pay  to  a  specified  bank  or  banks  certain 
portions  of  its  balances  each,  such  sum  to  be  deducted 
from  the  balances  due  from  the  exchange  of  that  day.  For 
example,  B,  a  creditor  bank,  gives  an  order  on  the  man- 
ager of  the  clearing-house,  signed  by  the  cashier,  to  pay 
C,  D,  or  E,  or  any  one  of  them,  a  part  of  its  balance,  or  the 
whole  of  the  sum  which  it  may  have  traded  to  them  at  the 
clearing-house.  The  manager  deducts  such  an  amount 
from  the  debit  balances  due  the  clearing-house  by  C,  D, 
and  E,  respectively.  Hence  they  are  required  to  pay 
to  the  clearing-house  only  the  difference  between  such 
orders  and  their  debit  balances. 

The  manager  also  obtains  another  kind  of  receipt — 
namely,  the  orders  to  the  clearing-house  manager  to  pay 
to  the  authorized  messengers  the  balances  in  cash  due 
from  the  exchanges  of  that  day.  The  form  of  this  order 
is  also  shown  in  fac-simile  herewith. 

The  settlements  of  the  amounts  of  all  orders  are  made 
between  the  banks  concerned,  the  debtor  banks  giving 
to  the  creditor  banks  cashiers'  checks,  currency,  or  ex- 
change for  the  amount  of  the  trade,  such  checks  always 
going  through  the  exchanges  on  the  following  day.  Sup- 


i                  \     \     \  CO 

X                                :         ! 

© 

oi 

^ 

^ 

03              ^               i 

•^ 

^ 

*^ 

lU  i  : 

^ 

P^^ 

^ 

CO  i  i 

V3 

/ 

13   iW 

§ 

0   II 

I   \l 

i  1 

.   (D   II 

. 

II 1 II 

i3-ia\ib.oba 

N  ii. 

ON 

4 

lu 

c             i 

1  a 

^ 

J 

1 

■ 

11 

tei 

0 

i 

: 

si 

Ci 

0 

. 

i 

I 

i 

: 

CO  ■= 

If 
Ii 

lo 

i    1 

•S      : 

3  S 

11  II  ; 

'   SOiiMII 

6            k    S     !     j  ii 

^         5  1    M  Jl 

u 


2/6  CLEARING-HOUSES 

pose,  for  example,  B's  debtor  balance  is  seventy-five  thou- 
sand dollars  to-day,  and  that  this  amount  is  settled  by  a 
trade  v^ith  some  creditor  bank.  B  gives  to  the  creditor 
bank  a  cashier's  check  for  seventy-five  thousand  dollars, 
which  the  latter  will  send  through  the  exchanges  to-mor- 
row against  B.  Suppose  also  that  in  addition  to  the 
seventy-five  thousand  dollars,  B's  debit  balance  goes  on 
increasing  each  day.  It  is  evident  that  in  that  case  B 
must  cease  to  postpone  an  actual  settlement  by  trading 
and  instead  make  a  cash  payment  at  the  clearing-house. 

This  practice,  it  will  be  perceived,  differs  materially 
from  that  in  vogue  in  Boston  with  respect  to  borrowing 
and  loaning  balances.  In  one  case  trades  are  made  by  the 
clerks;  in  the  other  they  are  restricted  to  one  or  another 
of  the  principal  officials  of  the  bank,  who  appears  at  the 
clearing-house  simply  for  that  purpose.  In  the  one  case 
interest  is  required;  in  the  other  it  is  not.  In  the  one 
case  the  checks  on  the  debtor  members  go  through  the 
exchanges  on  the  following  day;  in  the  other  they  do  not 
so  pass  through  at  once,  but  may  be  held  over  indefi- 
nitely. In  the  one  case  the  trading  is  solely  an  element 
of  mutual  convenience  to  members;  in  the  other  case 
it  is  an  element  of  gain  to  the  creditor  bank. 

Besides  the  regular  members,  there  are  nearly  one  hun- 
dred non-member  banks  clearing  through  the  Chicago 
Clearing-house.  In  other  words,  there  is  an  average  of 
more  than  five  to  each  member.  In  no  other  city  in  the 
country  is  the  ratio  in  this  regard  so  high.  Most  of  those 
clearing  in  this  way  are  private  banks  and  trust  com- 
panies. Since  Illinois  heads  the  Hst  of  States  in  number 
of  institutions  in  this  class,  it  is  not  surprising  that  the 


THE   CHICAGO   CLEARING-HOUSE  277 

number  in  Chicago  is  so  large,  or  that  it  should  represent 
such  a  large  fraction  of  the  clearing-house  business. 
Some  comparisons  will  be  interesting:  In  Boston  the 
members  and  non-members  clearing  through  the  mem- 
bers are  almost  equal.  In  Philadelphia  no  members 
are  allowed  to  clear  for  non-members.  In  New  York 
the  list  of  members  and  non-members  is  nearly  equal, 
there  being  a  few  more  non-members  than  members. 
At  Chicago  no  compensation  is  required  for  clearing 
outside  institutions,  except  that  in  some  cases  a  certain 
deposit  is  required  by  a  member  from  the  non-member 
for  which  it  clears. 

Each  member  is  supposed  to  know  the  condition  of  the 
non-members  clearing  through  it,  and  accordingly  is  held 
responsible  for  the  checks  of  the  non-members  in  the 
same  manner  as  for  its  own  checks.  No  statements  are 
required  for  non-members,  either  by  the  clearing-house, 
or  by  the  members  through  whom  they  clear;  nor  is  there 
anything  in  the  By-laws  of  the  clearing-house  that  au- 
thorizes the  examination  of  non-members. 

Members  of  the  association  are  required  to  furnish  the 
manager  statements  of  their  condition,  in  accordance  with 
the  following  rule :  "  Each  member  of  this  association 
shall  furnish  the  manager,  as  often  as  five  times  yearly,  a 
sworn  statement  of  its  condition,  at  such  times  as  may  be 
designated  by  tKe  Comptroller  of  the  Currency  for  state- 
ments from  national  banks;  and  at  such  other  times  and 
on  such  other  dates  as  the  clearing-house  committee  may 
require.  Said  statements  shall  be  made  in  form  and  man- 
ner prescribed  for  the  above-mentioned  statements  from 
national  banks.    Said  statements  shall  be  open  to  the  in- 


278  CLEARING-HOUSES 

spection  of  the  members  of  this  association,  but  other- 
wise shall  be  held  strictly  confidential."  Many  of  the 
Chicago  banks  voluntarily  publish  their  statements, 
though  no  requirement  of  this  kind  is  made  by  the 
Clearing-house  Association.  The  daily  clearings  are 
the  only  regularly  published  statistics  of  the  association. 

No  items  with  restricted  indorsements  are  allowed  to 
go  through  the  exchanges,  the  rule  requiring  that  all 
indorsements  on  checks  and  other  paper  for   deposit 

shall  be  in  blank,  or  simply,  "  Pay  to or  order," 

without  qualification. 

The  expenses  of  the  Chicago  Clearing-house  are  met 
by  an  annual  assessment  of  two  hundred  dollars  upon 
each  of  the  members,  and  the  payment  of  the  balance 
after  that  amount,  according  to  the  daily  average  of  ex- 
changes sent  to  the  clearing-house  for  the  preceding 
three  months.  The  fines  upon  the  members,  amounting 
to  two  hundred  or  three  hundred  dollars  annually,  are 
devoted  to  the  payment  of  expenses.  The  total  annual 
appropriation  for  this  purpose  has  in  the  past  averaged 
in  the  neighborhood  of  eight  thousand  dollars,  but  the 
increase  in  expenses  incident  to  the  new  quarters,  which, 
as  before  remarked,  the  Chicago  Clearing-house  is  just 
about  to  occupy,  will  demand  a  considerably  larger 
appropriation. 

The  fines  enforced  by  the  Chicago  Clearing-house  are 
unusually  heavy :  For  failure  to  be  represented  punctual- 
ly at  the  morning  exchanges  for  the  first  five  minutes  or 
part  thereof  the  fine  is  three  dollars;  for  the  second  five 
minutes  or  part  thereof,  ten  dollars;  and  for  tardiness 
exceeding  ten  minutes,  twenty-five  dollars.     So  prompt, 


THE   CHICAGO   CLEARING-HOUSE  279 

however,  have  been  the  members  that  the  twenty-five- 
dollar  fine  has  never  been  imposed,  and  in  only  a  few 
instances  has  the  ten-dollar  fine  been  assessed. 

Banks  desiring  to  become  members  make  a  formal 
application  to  the  clearing-house  committee.  The  latter 
thoroughly  examines  their  condition  and  standing,  and 
makes  a  report  to  the  association.  The  applicant  then 
may  be  admitted  on  receiving  the  affirmative  vote  of 
three-fourths  of  the  members  of  the  association.  The 
members  are  required  to  pay  an  admission  fee  of  one 
thousand  dollars,  and  to  assent  to  the  Articles  of  Incor- 
poration and  By-laws,  thus  being  put  upon  the  same 
footing  as  the  original  members.  The  By-laws  provide 
that  no  new  members  shall  be  admitted  except  banks 
having  their  principal  office  located  in  the  city  of. Chi- 
cago, organized  under  the  laws  of  the  United  States 
or  under  the  laws  of  the  State  of  Illinois,  and  having 
done  business  therein,  with  their  subscribed  capital  stock 
fully  paid  in,  for  a  period  of  at  least  six  months  prior  to 
the  application  for  membership.  It  is  further  provided 
that  no  new  member  shall  be  admitted  except  banks 
having  a  paid-in  capital  of  at  least  five  hundred  thousand 
dollars,  which  capital  shall  be  kept  intact  during  the 
membership.  The  Assistant  Treasurer  of  the  United 
States,  located  in  Chicago,  may,  upon  application,  be 
admitted  to  membership,  without  the  payment  of  an  ad- 
mission fee,  but  shall  have  no  voice  in  the  management. 
Any  member  may  withdraw  at  pleasure,  first  paying  its 
due  proportion  of  all  expenses  incurred  and  signifying 
its  intention  to  the  clearing-house  committee  to  with- 
draw. 


28o  CLEARING-HOUSES 

In  many  clearing-house  associations  it  is  easier  to  expel 
members  than  to  admit  them,  the  vote  being  a  majority 
for  expulsion  and  three-fourths  for  admission.  At  Chi- 
cago, however,  the  conditions  of  admission  and  expulsion 
are  the  same,  the  requirements  in  each  case  being  a  vote 
of  three-fourths  of  all  the  members. 

In  many  of  the  most  important  cities  of  the  country, 
clearing-house  loan  certificates  have  been  issued  from 
time  to  time,  in  seasons  of  great  pressure — for  example, 
as  in  the  panics  of  1873  and  1893 — thus  giving  elasticity 
to  the  currency  in  times  of  greatest  need  and  affording 
relief  to  the  banks  from  the  terrific  strain  upon  them.  In 
Chicago,  however,  such  action  has  never  been  taken,  al- 
though in  1893  the  subject  was  under  serious  considera- 
tion and  a  vote  of  fifteen  to  nine  was  cast  in  favor  of  an 
issue.  At  this  time  extensive  loans  were  made  to  the 
members  who  were  most  in  need,  the  loans  amounting  to 
one  million  seven  hundred  and  forty-five  thousand  dol- 
lars. This  represents  the  largest  amount  ever  loaned  in 
Chicago  in  this  manner,  and  it  was  all  repaid  within  sixty 
days  from  date.  On  other  occasions,  banks  that  have 
been  temporarily  embarrassed,  and  which  upon  the  care- 
ful examination  by  the  clearing-house  committee  were 
found  to  be  solvent  and  in  possession  of  collateral  suffi- 
cient to  secure  their  loans,  have  been  promptly  assisted 
by  their  fellow-members  in  the  clearing-house,  each  fur- 
nishing aid  in  proportion  to  its  capital  and  deposits. 

The  Chicago  Clearing-house  has  experienced  various 
changes  in  the  number  of  its  members.  The  membership 
at  one  time  was  as  high  as  thirty,  and,  as  already  stated,  is 
at  present  only  nineteen;    yet  the  record  of  clearings 


THE   CHICAGO   CLEARING-HOUSE  281 

shows  an  almost  uninterrupted  increase  from  the  be- 
ginning of  the  organization.  A  table  prepared  by  the 
association  shows  the  total  clearings  for  each  year  from 
the  organization  to  date,  and  is  of  pecuHar  interest, 
since  it  shows  the  marvellous  growth  of  the  business 
of  the  city,  which  in  a  very  short  period  has  attained  the 
third  rank  among  American  financial  centres,  being  sur- 
passed only  by  New  York  and  Boston. 

No  losses  have  ever  occurred  from  the  enormous  trans- 
actions which  have  been  repeated  from  day  to  day  during 
the  thirty-two  years  of  the  history  of  the  association. 
These  exchanges  are  conducted  by  two  men — the  man- 
ager and  one  assistant — and  their  record  is  embodied  in 
four  books.  One  contains  simply  the  copy  of  the  man- 
ager's proof-sheet,  showing  the  debit  and  credit  ex- 
changes and  balances  of  each  bank,  and  the  total  of  the 
same  for  all  the  banks.  Another  book,  the  items  in  which 
are  posted  from  the  first,  contains  a  record  of  the  daily 
debits,  credits,  and  balances  of  each  bank,  kept  apart 
from  a  similar  record  of  each  of  the  other  banks.  The 
third  book  contains  a  transcript  of  the  total  clearings 
and  balances  by  days,  weeks,  and  months.  The  fourth 
book  is  a  record  of  the  amount  and  kind  of  money  paid 
by  and  to  the  several  banks  in  settlement  of  balances. 
From  these  records  the  total  transactions  of  each  bank 
with  the  clearing-house  for  a  given  period  may  be  readily 
ascertained.  The  annual  transactions  beginning  with 
1865  have  been  computed  and  posted  in  this  manner. 

In  the  rules  of  the  Chicago  Clearing-house  due  pro- 
vision is  made  for  the  administration  of  its  affairs  in  all 
details.    The  several  powers  are  lodged  in  a  president, 


282  CLEARING-HOUSES 

vice-president,  manager,  secretary,  treasurer,  and  clear- 
ing-house committee.  In  addition,  five  directors  are 
charged  with  the  responsibility  of  attending  to  all  matters 
pertaining  to  the  corporate  existence  of  the  association, 
the  Chicago  Clearing-house  being  the  only  incorporated 
clearing-house  at  present  existing  in  America. 

The  annual  meeting  is  held  on  the  third  Tuesday  in 
January,  when  the  officers,  directors,  clearing-house  com- 
mittee, and  manager  of  the  clearing-house  are  elected  by 
ballot.  A  majority  vote  of  a  quorum  determines  the 
result,  a  quorum  being  a  majority  of  all  the  associated 
banks.  At  this  meeting  each  member  of  the  association 
must  be  represented  by  one  or  more  duly  authorized  per- 
sons, and  is  entitled  to  one  vote.  Besides  the  general 
meetings,  the  president  is  required  to  call  special  meet- 
ings whenever  he  may  deem  it  necessary,  or  whenever 
he  is  so  requested  by  five  members  of  the  association,  or 
by  the  clearing-house  committee. 

The  president  and  vice-president  are  constituted  the 
officers  of  the  association  and  must  be  elected  from  among 
the  directors.  Upon  the  president,  and  in  his  absence 
upon  the  vice-president,  devolves  the  duty  of  presiding  at 
all  meetings  of  the  association  and  of  calling  the  special 
meetings  under  the  conditions  named  above.  The  man- 
ager has  immediate  charge  of  all  the  business  of  the 
clearing-house,  subject  to  the  control  of  the  committee. 
He  supervises  and  directs  the  work  of  the  clerks  and  mes- 
sengers while  in  the  clearing-house,  and,  in  addition,  is 
ex-oiHcio  secretary  and  treasurer  of  the  association.  As 
treasurer,  he  has  charge  of  the  funds  belonging  to  the  as- 
sociation and  disburses  the  same  on  the  order  of  the  clear- 


THE   CHICAGO   CLEARING-HOUSE  283 

ing-house  committee.  He  is  required  to  keep  a  correct 
record  of  all  the  money  received  and  disbursed  on  account 
of  the  association,  and  to  submit  a  detailed  statement  of 
the  same  at  the  annual  meeting  and  whenever  requested 
by  the  clearing-house  committee.  As  secretary,  he  keeps 
the  minutes  of  the  proceedings  of  the  association  in  a 
book  provided  for  that  purpose.  His  salary  is  fixed  by 
the  association  and  he  is  required  to  give  a  bond  with 
sureties  in  a  sum  of  not  less  than  twenty  thousand  dol- 
lars, to  be  approved  by  the  clearing-house  committee. 
He  is- required  to  report  to  the  committee  all  violations 
of  the  Charter  or  By-laws  that  may  come  to  his  notice. 
He  holds  office  until  the  next  annual  election,  but  is 
liable  to  suspension  by  the  clearing-house  committee  or 
expulsion  by  the  association. 

The  clearing-house  committee  consists  of  five  members 
and  is  elected  by  majority  vote  by  ballot  at  the  annual 
meeting  of  the  association.  Upon  this  committee  de- 
volves the  chief  responsibility  for  the  successful  conduct 
of  the  affairs  of  the  association.  It  is  its  duty  when  oc- 
casion demands  to  procure  a  suitable  room  or  rooms  for 
the  clearing-house,  with  all  necessary  articles  for  the  con- 
venient transaction  of  its  business.  The  committee  ap- 
points the  necessary  clerks,  establishes  rules  to  be  ob- 
served at  the  clearing-house  in  cases  not  provided  for  in 
the  constitution,  but  subject  to  the  approval  of  the  asso- 
ciation, and  has  general  supervision  of  clearing-house 
affairs. 

The  clearing-house  committee  determines  the  assess- 
ment of  each  member  for  its  quota  of  expenses,  and  orders 
the  payment  of  bills  by  drawing  on  the  treasurer  for  the 


284  CLEARING-HOUSES 

same.  The  committee  hears  and  determines  all  disputes 
arising  between  members  of  the  association,  when  submit- 
ted to  it  by  the  parties  in  dispute,  thus  performing  a 
function  sometimes  discharged  by  a  separate  committee 
known  as  the  "  arbitration  committee."  A  record  of  each 
case  of  dispute  is  kept  in  a  book  provided  for  that  purpose, 
which  book  is  kept  at  the  clearing-house  and  is  open  to 
the  inspection  of  all  the  members.  The  committee  fills 
vacancies  in  the  offices  or  other  committees,  and  has 
power  to  suspend  the  manager  and  any  clerk,  and  any 
member  of  the  clearing-house,  whenever  such  action  is 
deemed  advisable.  Finally,  it  is  the  duty  of  the  commit- 
tee, whenever  it  may  seem  to  be  necessary,  to  examine 
any  member  of  the  association  and  establish  a  scale  of 
fines  for  errors,  disorderly  conduct,  or  other  irregularities 
of  the  representatives  of  the  members. 


CHAPTER   XVII 

THE  ST.    LOUIS    CLEARING-HOUSE 

Early  History — Scope  of  Membership — Plan  of  Administration 
—Management  of  Clearings — Records  Kept  by  the  Manager. 

The  members  of  the  St.  Louis  Clearing-house  Associa- 
tion have  stood  together  with  remarkable  unanimity  on 
the  uniform  rates  of  collection  which  were  introduced  on 
March  i,  1895,  ^"^  their  success  is  justly  attracting  the 
attention  of  similar  associations  throughout  the  country. 

The  St.  Louis  Association  was  organized  in  1868,  in 
the  midst  of  the  period  of  reconstruction  and  when  the 
country  was  slowly  recovering  from  the  blight  of  civil 
war.  At  the  beginning  there  were  thirty-five  members, 
and  in  five  years  the  list  had  grown  to  forty-one.  This 
was  in  the  troublous  time  of  1873,  when  the  institution  of 
clearing-house  loan  certificates  first  became  general,  and 
which  has  since  proved  invaluable  in  similar  crises.  St. 
Louis  joined  the  other  leading  associations  at  that  time 
in  the  issue  of  these  certificates,  but  to  what  extent  it  is 
not  known,  the  records,  unfortunately,  having  been  lost  in 
a  fire.  In  subsequent  periods  of  financial  stringency,  the 
association  has  not  found  it  necessary  to  resort  to  the, 
issue  of  such  certificates,  although  in  1893  some  of  the 
members  were  hard-pressed  and  obtained  relief  through 
the  association.  The  membership  has  greatly  diminished 

285 


286  CLEARING  HOUSES 

since  the  date  of  organization,  and,  strange  to  say,  is  not 
half  as  great  now  as  in  1873.  Some  failures  have 
occurred,  but  the  change  has  been  due,  in  the  main,  to 
consoHdation  and  to  voluntary  liquidation. 

Originally,  the  membership  embraced  private  banks, 
savings  banks,  and  State  and  national  banks,  but  now^  no 
private  institutions  are  included.  The  present  list  com- 
prises nineteen  members,  there  being  ten  State  banks, 
eight  national  banks,  and  the  German  Savings  Institution. 
Besides  these,  the  Post-office  and  the  Assistant  Treasurer 
of  the  United  States  clear  without  the  full  power  of  mem- 
bers. The  Assistant  Treasurer  pays  nothing  for  the  priv- 
ilege, but  the  Post-ofifice  is  assessed  not  in  proportion  to 
clearings,  but  a  definite  amount  fixed  at  forty  dollars  a 
year. 

Banks  may  become  members  of  the  association  by  a 
two-thirds  vote  of  all  the  members  and  by  the  payment  of 
an  admission  fee  of  one  thousand  dollars,  in  addition  to 
the  annual  assessment  for  expenses;  but,  before  applicants 
can  be  referred  to  the  association  for  admission,  their 
merits  must  be  passed  in  review  by  the  committee  of  man- 
agement, and  they  must  have  a  paid-up  capital  of  not  less 
than  five  hundred  thousand  dollars.  Any  member  may 
be  expelled  by  a  three-fourths  vote  of  the  members,  for 
violation  of  any  of  the  Articles,  By-laws,  or  Rules  of  the 
association.  Likewise,  any  member  may  be  suspended  by 
the  committee  of  management,  provided  a  majority  at 
least  of  the  committee  is  present,  and  that  the  vote  of 
those  present  is  unanimous.  It  will  be  noted  that  the 
vote  for  expulsion  is  greater  than  that  required  for  ad- 
mission.   This  is  the  reverse  of  the  rule  in  most  associa- 


THE    ST.    LOUIS    CLEARING-HOUSE  287 

tions,  for,  ordinarily,  it  is  easier  to  get  rid  of  a  member 
than  it  is  to  admit  him  to  membership. 

Besides  the  members,  there  are  thirteen  outside  insti- 
tutions clearing  through  the  association,  five  of  which 
are  trust  companies,  four  are  State  banks,  two  are  sav- 
ings banks,  and  two  are  national  banks.  The  last  named, 
and  the  Workingmen's  Bank,  (now  Southern  Illinois 
National  Bank)  are  located  in  East  St.  Louis.  The 
members  clearing  for  outside  banks  and  trust  companies 
are  liable  for  their  checks  and  certificates  of  deposit, 
the  same  as  for  their  own;  and  "  their  liability  continues 
until  after  the  completion  of  the  exchanges  of  the 
morning  next  following  the  receipt  of  notice  of  discon- 
tinuance of  such  agency." 

Section  3  of  Article  i  of  the  constitution  provides  as 
follows : 

"  The  officers  of  the  association  shall  consist  of  a  presi- 
dent and  vice-president,  who  shall  be  selected  from 
among  the  members  of  the  association,  and  elected  by 
ballot  at  a  stated  meeting  in  January,  annually,  and 
shall  hold  their  offices  until  their  successors  are  chosen 
and  qualified,  but  shall  not  be  eligible  for  re-election 
for  more  than  two  consecutive  years." 

Most  clearing-houses  have  embodied  in  their  constitu- 
tions similar  provisions,  except  that  it  is  unusual  to  pro- 
vide that  members  shall  not  be  eligible  for  re-election  for 
more  than  two  consecutive  years.  There  are  also  elected 
at  the  same  annual  meeting  a  manager  and  committee  of 
management,  as  opposed  to  the  usual  custom  of  appoint- 
ment of  the  manager  by  the  clearing-house  committee, 
and  the  election  of  the  latter.    In  the  hands  of  the  com- 


288  CLEARING-HOUSES 

mittee  of  management  is  placed  the  power  to  examine 
the  books  and  accounts  of  any  member  of  the  association, 
whenever  they  may  deem  it  necessary,  and  to  employ  ac- 
countants to  aid  in  such  examination.  They  are  author- 
ized to  suspend  any  bank  from  the  privileges  of  the 
clearing-house  until  the  association  has  an  opportunity 
to  act  upon  it. 

The  president,  or,  in  his  absence,  the  vice-president, 
presides  at  all  meetings  of  the  association.  He  is  required 
to  call  meetings  of  the  same  whenever,  in  his  opinion,  the 
interests  of  the  association  require  it,  or  whenever  re- 
quested to  do  so  by  the  committee  of  management  or  any 
three  members  of  the  association.  The  manager,  in  addi- 
tion to  the  usual  duties  falling  to  his  of^ce,  acts  as  secre- 
tary and  treasurer  of  the  association. 

Each  member  is  required  by  the  constitution  to  fur- 
nish the  manager,  for  publication,  "  as  often  as  five  times 
a  year,  a  sworn  statement  of  its  condition,  at  such  times  as 
may  be  designated  by  the  Comptroller  of  the  Currency  or 
the  Secretary  of  State,  for  statements  from  national  or 
State  banks,  and  at  such  times  and  dates  as  the  clearing- 
house committee  may  require.  Such  statements  are  made 
in  the  form  and  manner  prescribed  for  statements  from 
national  and  State  banks,  and  are  open  to  the  inspection 
of  members  of  the  association."  This  provision  applies 
with  equal  force  to  all  banks  not  members  of  the  associa- 
tion, clearing  through  members,  but  not  to  trust  com- 
panies enjoying  such  privileges.  Such  statements  are 
now  published  in  the  daily  press. 

The  expense  of  printing  is  not  borne  equally  by  the 
members,  but  is  apportioned  in  the  same  manner  as  the 


THE    ST.    LOUIS    CLEARING-HOUSE  289 

other  expenses.  Each  bank  pays  one  hundred  and  twen- 
ty-five dollars  annually,  in  advance,  and  the  expenses 
necessary  after  that  amount  are  assessed  quarterly  upon 
the  members,  according  to  the  average  daily  amount  of 
exchanges  which  each  has  sent  to  the  clearing-house  dur- 
ing the  preceding  three  months.  Each  non-member, 
clearing  through  a  member,  pays  one  hundred  and 
twenty-five  dollars  a  year,  in  advance,  the  manager,  in 
January,  sending  a  draft  for  this  amount  through  the 
clearing  bank  against  said  non-member. 

The  fines,  which  amount  to  less  than  three  hundred 
dollars  a  year,  are  collected  from  the  banks  by  the  man- 
ager and  are  paid  by  the  offending  clerks  or  by  their 
banks,  according  to  the  nature  of  the  offence.  The  total 
expenses  of  the  association  average  about  nine  thousand 
dollars  a  year. 

We  have  now  to  analyze  the  operations  as  they  take 
place  at  the  clearing-house  from  day  to  day,  and  in  this 
we  shall  find  that  St.  Louis  differs  in  some  important  de- 
tails from  associations  in  the  East.  The  clearing-room 
is  a  beautiful,  centrally  located  apartment,  and  sufficiently 
elevated  to  command  a  delightful  view  of  the  city.  Out- 
side of  New  York,  it  is  the  most  commodious  and  best- 
lighted  clearing-room  in  the  United  States,  but  it  is  not 
so  artistically  equipped  as  the  clearing-room  at  Pitts- 
burg. 

On  each  business  day  the  clerks  appear  at  the  clearing- 
room  at  10.30  o'clock,  except  on  Saturdays,  and  then  at  9 
o'clock,  with  their  demands  separately  made  out  against 
each  of  the  other  banks,  and  with  their  items  bound  with 
a  rubber  band — not  placed  in  envelopes,  as  is  the  case  in 


UNIVE 


^''l 


290 


CLEARING-HOUSES 


most  large  cities.  A  fac-simile  of  one  of  the  lists  used  for 
the  purpose  is  given  in  the  illustration.  Immediately 
upon  his  arrival,  each  clerk  delivers  his  items  at  the 
desks  of  the  several  members  upon  which  they  are  drawn. 
The  settling  clerks  sort,  according  to  the  number  of  the 
banks,  the  packages  as  they  are  deposited  by  the  de- 
livery clerks. 

In  five  minutes  after  the  hour  appointed  for  the  ex- 
changes, the  settling  clerks  are  in  position,  and  at  the  tap 
of  the  bell  the  distributing  clerks  proceed  in  line  around 
the  room,  passing  along  the  sheet  containing  a  list  of  their 
exchanges,  to  be  receipted  for  by  the  settling  clerks.  The 
credit  and  debit  exchanges  and  the  balances  are  listed  by 
the  manager  in  the  usual  way  on  his  proof-sheet.  After 
striking  the  balance,  he  calls  off  the  credit  and  debit  bal- 
ances and  they  are  listed  by  the  clerks  on  sheets  prepared 
in  blank  form  for  that  purpose,  and  taken  back  to  their 
banks.  The  taking  of  such  copies  is  optional  with  the 
members,  it  being  intended  for  the  information  of  any 
banks  that  may  desire  them.  Hence  the  representatives 
of  some  of  the  smaller  members  do  not  remain  to  take 
them,  but  return  to  their  banks  immediately  after  the 
proof. 

One  hour  after  the  exchanges  the  creditor  members 
return  to  receive  their  balances,  whereupon  the  man- 
agei-  issues  to  them  his  certificates  of  indebtedness  by  the 
debtor  members,  payable  on  demand  to  said  creditor 
members  ''  without  recourse  upon  any  member  of  the 
association  after  2  o'clock  p.  m.  of  the  same  day,  except 
the  debtor  members  named  in  such  certificates,  and  ex- 
cept on  half-holiday  Saturdays,  on  which  days  the  cer- 


Debit   List 

St.  Louis  Clearing  House,._.. 

From 


1900 


1 

3 

9 

11 

13 


18 
19 

ai 

as 

29 
32 
38 


Assistant  Treasurer  United  States.. 

Boatmen's  Bank 

Fourth  National  Bank 

Franklin  Bank 

German- American  Bank 

14     German  Savings  Institution 

16     International  Bank 

Mechanics'  Bank 

Merchants'-Laclede  National  Bank. 

Continental  National  Bank 

National  Bank  of  Commerce 

South  Side  Bank 

State  National  Bank  of  St.  Louis. . 

Third  National  Bank 

American  Exchange  Bank 

Post  Office 


1 

3 

9 

11 

13 

14: 

16 
18 
19 
21 

26 
21 
28 
29 
32 


Cltecks  or  other  items  cleared  tltrongh  a,  Member  of  this 
Association  on  a  Banlc  or  other  Institution  not  a  Member 
thereof  shall  be  listed  on  and  fastened  to  a  separate  slip, 
and  the  total  footing  of  the  slip  entered  as  one  itent  on  the 
regular  clearing  slip.  The  clearing  of  such  items  loosely  or 
in  any  other  manner  than  herein  provided  is  prohibited. 


Lafavette  Bank clears  through ; 

North  Western  Savings  Bank 

Bremen  Bank 

Southern  Commercial  and  Savings  Bank. . 
80.  Illinois  Kat'l  Bank,  East  St.  Louis. . 

Hississippi  Valley  Trust  Co 

Union  Trust  Co 

Mercantile  Trust  Co 

St.  Louis  Trust  Co 

Jefferson  Bank 

Lincoln  Trust  Co 

First  ^rational  Bank,  East  St.  Louis. . . . 


.  3  Boatmen's  Bank. 
9  Fourth  National  Bank. 
13  Oerfflan-Amerioan  Bank. 
13  Oerman-Ameriean  Bank. 

18  Mechanics'  Bank. 

19  Merchants'-Laclede  Hat.  Bank. 
19  Merchants'-Laclede  Hat.  Bank. 
26  National  Bank  of  Commerce. 

28  State  National  Bank. 

29  Third  National  Bank. 
29  Third  National  Bank. 
29  Third  National  Bank. 


Fac-simile  of  Debit  List  Used  in  St.  Louis  Clearing-house. 


292  CLEARING-HOUSES 

tificates  of  indebtedness  are  issued  without  recourse  upon 
any  member  of  the  association  after  ii  o'clock  a.  m.  of 
the  same  day,  except  the  debtor  members  named  in  such 
certificates." 

Usually,  the  manager's  certificates  are  cashed  at  the 
counter  of  the  debtor  bank  upon  presentation  of  the  same 
by  the  creditor  bank;  but  sometimes  they  are  certified  by 
the  latter  and  sent  through  the  exchanges  against  them 
on  the  following  day.  Some  banks,  however,  refuse  to 
certify,  but  give  a  cashier's  check  to  a  creditor  member  in 
exchange  for  a  manager's  check  held  against  them,  and 
the  former  is  sent  through  the  exchanges  on  the  follow- 
ing day.  Manifestly  there  is  no  occasion  for  the  ap- 
pearance of  the  debtor  members  at  the  clearing-house 
in  the  settlement  of  balances.  Immediately,  however, 
after  issuing  his  checks  to  creditor  members  the  manager 
fills  out  a  blank  giving  the  clearings  and  balances,  as 
shown  in  the  illustration,  and  delivers  the  same  to  the 
debtor  bank. 

In  this  way  the  member-banks  know  whether  the 
amount  of  their  balance,  as  reported  to  them  by  the  clerk 
on  his  return  from  the  exchanges,  proves  with  that  listed 
by  the  manager,  and  also  what  banks  hold  the  manager's 
certificates  of  indebtedness  upon  them  and  in  what 
amount.  If  the  total  of  the  manager's  checks  issued 
against  them  agrees  with  the  amount  of  their  balance, 
they  know  that  to  be  correct  the  manager's  checks  pre- 
sented at  their  counter  by  the  creditor  members  must 
agree  with  the  amounts  of  the  same  as  listed  on  the  card 
by  the  manager.  This  custom  of  delivering  cards  is  prac- 
tically unknown  to  other  associations. 


ST^  LOUIS  CLEARING  HOUSE. 

Date                                                      1900 

Total  Clearings,  $ 

B.A.n:..A.ITOES_ 

Dr. 

Bank   No. 

Or. 

. .  1  Assistant  Treasurer  U.  S. . 

3  Boatmen's 

9  Fourth  National 

11  Franklin 

13  German-American 

14  German  Savings 

16  International 

18  Mechanics' 

....19  Merchants'.LacIede... 

21  Continental 

26  National  Bank  Commerce. 

27  South  Side 

...28  State  National  Bank... 

29  Third  National 

...32  American  Exchange... 

38  Post-Office ».. 

TOTAL 

Form  Used  for  Listing  Balances  in  St.  Louis  Clearing-house. 


294  CLEARING-HOUSES 

The  By-laws  define  proper  matter  for  clearings  as  fol- 
lows: 

1.  All  checks  or  drafts  upon  or  certificates  of  deposit, 
demand  or  matured,  of  any  member  of  the  clearing-house, 
or  any  bank  clearing  through  any  member. 

2.  Any  other  matter  specially  agreed  to  by  any  mem- 
ber, or  bank  clearing  through  it,  until  notice  is  given  to 
the  contrary. 

3.  Mercantile  or  other  paper  payable  at  any  bank, 
when  such  clearance  shall  have  been  authorized  by  the 
said  bank,  but  not  otherwise.  Items  with  restricted  en- 
dorsements and  all  notes,  drafts,  and  bills  of  exchange 
not  certified  on  the  previous  day  are  improper  matter 
for  clearing;  also  all  unstamped  and  illegibly  stamped 
items.  Express  money-orders,  railroad  and  other  pay 
checks  are  not,  by  the  rules  of  the  association,  proper 
matter  for  clearing,  but  their  clearing  is  allowed  by 
consent  of  the  banks  at  which  they  are  payable  and  only 
on  conditions  prescribed  by  such  banks.  Such  orders 
and  pay  checks  "  must  be  listed  on  separate  slips, 
fastened  together  firmly  with-  the  slips,  and  the  full 
amount  of  them  entered  the  same  as  one  check  upon 
the  regular  clearing  slip."  For  violation  of  this  rule, 
any  member  is  liable  to  a  fine  of  two  dollars  for  clearing 
improper  matter. 

The  manager  keeps  the  following  records  of  trans- 
actions : 

1.  A  record  of  the  daily  clearings  and  balances  of  each 
member.  The  same,  by  addition,  is  found  for  weeks, 
months,  and  years. 

2.  The  clearings  register  showing  the  daily  clearings, 
debits  and  credits,  of  each  member. 


ST.  LOUIS  CLEARING  HOUSE. 

IQOO 

Clearingrs,          ,       .       .       $ 

BalanrsA,      ....        $ 

Mn. 

nfthit,      .        .        .        .        $ 

Checks  Favor. 

No.                                                       $ 

« 

a 

(( 

u 

ti 

Form  of  Manager's  Report  of  Clearings,  Balances,  etc. 


296  CLEARING-HOUSES 

3.  A  record  of  total  credit  clearings  of  each  member 
by  months. 

4.  A  record  of  the  clearings,  debit  and  credit,  by 
months  for  each  member,  a  total  of  the  same  being  made 
at  the  end  of  the  year. 

5.  A  monthly  and  annual  total  of  the  clearings  of  all 
the  members. 

6.  A  condensed  record  of  the  published  bank  state- 
ments. 

Although,  as  we  have  seen,  there  has  been  a  great  de- 
crease in  the  membership  from  the  original  number,  the 
volume  of  exchanges  has  gone  on  increasing,  and  the 
association  now  takes  fifth  rank  among  the  clearing- 
houses of  the  country. 


CHAPTER   XVIII^ 

CANADIAN   CLEARING-HOUSES 

The  Banking  and  Currency  System  of  the  Dominion  of  Canada 
— Limitations  of  Canadian  Clearing-houses — Form  of  Gov- 
ernment— Routine  of  Exchanges— How  Members  in  Default 
are  Dealt  with  —  Monthly  Statements  to  the  Minister  of 
Finance — Records  of  Clearing-house  Transactions. 

Preliminary  to  a  consideration  of  the  Canadian  clear- 
ing-system, it  is  necessary,  in  order  to  facilitate  the  task 
of  the  reader  in  comprehending  and  appreciating  its 
essential  features,  to  set  forth  briefly  the  fundamental 
principles  of  the  banking  and  currency  systems  of  the 
Dominion. 

There  are  some  thirty-eight  chartered  banking  institu- 
tions in  operation  in  Canada,  with  nearly  five  hundred 
branches,  all  organized  under  what  is  known  as  Section 
85  of  the  Act  of  Victoria,  Chapter  31,  or  "The  Bank 
Act  "  assented  to  May  16,  1890.  These  banks  are  doing 
business  in  all  parts  of  the  country  and  in  the  leading 
cities  of  the  United  States  as  well.  No  limitations, 
numerical  or  geographical,  are  placed  upon  their  crea- 
tion. For  example,  one  bank  has  about  forty  branches, 
with  one  of  them  located  in  London,  England. 

The  combined  paid-up  capital  of  the  banks  acting  un- 
der the  Dominion  Government  Charter  is  in  round  num- 
bers sixty  million  dollars,  each  incorporated  bank  being 

297 


298  CLEARING-HOUSES 

required  to  have  a  capital  of  not  less  than  five  hundred 
thousand  dollars..  In  accordance  with  the  following  sec- 
tion of  the  General  Banking  Act,  each  incorporated  in- 
stitution may  issue  notes  to  the  full  amount  of  its  unim- 
paired paid-up  capital : 

"  The  bank  may  issue  and  re-issue  notes  payable  to 
bearer  on  demand  and  intended  for  circulation;  but  no 
such  note  shall  be  for  a  sum  less  than  five  dollars,  or  for 
any  sum  that  is  not  a  multiple  of  five  dollars,  and  the  total 
amount  of  such  notes  in  circulation  at  any  time  shall  not 
exceed  the  amount  of  the  unimpaired  paid-up  capital  of 
the  bank." 

Since  the  unimpaired  paid-up  capital  of  the  banks  ex- 
ceeds sixty  million  dollars,  bank-notes  to  that  amount 
may  be  issued,  although,  as  a  fact,  there  are  only  a  little 
more  than  forty  milhon  dollars  of  such  notes  out  at  pres- 
ent. There  is  a  margin  of  nearly  twenty  million  dollars 
for  further  expansion. 

^  When  the  demand  for  money  is  active,  as  in  certain 
seasons  of  the  year  or  in  prosperous  times,  the  banks  are 
able  to  keep  out  a  large  circulation,  but  when  the  tide 
begins  to  turn  and  the  amount  of  labor  diminishes,  the 
notes  begin  immediately  to  flow  back  to  the  banks  for 
redemption.  The  demand  for  currency,  therefore,  by  its 
own  free  and  unrestrained  action,  causes  an  expansion  of 
the  volume,  and  that,  too,  in  proportion  to  the  demand, 
while  the  abatement  of  that  demand  causes  a  correspond- 
ing contraction  of  the  volume.  By  this  admirable  self- 
regulating  process  of  expansion  and  contraction  of  the 
money  supply,  Canada  has  been  particularly  free  from 
panics,  which,  with  all  their  disastrous  consequences,  have 


CANADIAN   CLEARING-HOUSES  299 

sorely  afflicted  the  industrial  and  commercial  interests 
of  the  United  States  from  time  to  time. 

There  are  only  two  forms  of  paper  currency,  one  of 
which  is  the  notes  the  banks  issue,  the  other  being  the 
Dominion  legal  tender  notes,  the  issue  of  which  amounts 
to  about  twenty-three  million  dollars.  This,  with  the 
forty  million  dollars  of  bank-notes,  makes  a  total  paper 
currency  of  more  than  sixty  million  dollars. 

Each  "bank  issuing  notes  is  required  to  pay  to  the  Min- 
ister of  Finance  and  Receiver  General  a  sum  of  money 
equal  to  five  per  cent,  of  the  average  amount  of  its  notes 
in  circulation.  Upon  all  such  deposits  interest  is  received 
by  the  depositing  bank  at  the  rate  of  three  per  cent,  per 
annum.  Being  required  to  deposit  as  a  redemption  fund 
only  five  per  cent,  of  their  note  issue,  and  receiving  three 
per  cent,  interest  on  that  deposit,  the  banks  find  in  their 
note  issue  one  of  their  chief  sources  of  profit,  and  hence 
they  endeavor  to  maintain  as  large  a  circulation  as  pos- 
sible. The  manner  in  which  the  notes  of  a  bank  return  to 
it  for  redemption  will  be  explained  further  on. 

Within  recent  years  clearing-houses  have  been  estab- 
lished in  nearly  all  the  leading  cities  of  Canada,  with  re- 
sults no  less  gratifying  than  those  attending  the  same 
movement  in  the  United  States.  Halifax  led  the  way  in 
1887,  followed  by  Montreal  in  1889,  Hamilton  and  To- 
ronto in  1891,  Winnipeg  in  1893,  and  St.  John,  N.  B.,  in 
1896.  Each  clearing-house  is  working  under  a  set  of 
rules  governing  the  action  of  the  banks  in  their  daily 
exchanges,  and  settlements  of  balances,  and  specifying 
the  manner  in  which  the  government  of  the  association 
shall  be  administered. 


300  CLEARING-HOUSES 

In  the  preambles  of  the  Constitution  of  the  Hamilton, 
Halifax,  and  St.  John  clearing-houses,  the  objects  of  the 
associations  are  declared  to  be  the  effecting  of  a  '*  more 
perfect  and  satisfactory  settlement  of  the  daily  balances  " 
between  the  members,  nothing  being  said  of  the  equally 
important  advantage  of  a  more  satisfactory  method  of 
exchanging  items.  At  Toronto  this  latter  feature  is 
embodied  in  the  statement  that  the  purpose  of  the  asso- 
ciation is  facilitating  the  daily  exchanges  and  settlements 
between  the  banks. 

There  is  no  indication  that  the  founders  of  any  of  those 
associations  either  intended,  or  supposed,  that  it  would 
ever  transcend  the  functions  of  a  clearing-house  of  the 
first  class,  and  indeed  there  has  not  been  thus  far  a  single 
instance  where  any  other  function  has  ever  been  per- 
formed. No  uniform  rates  of  charges  for  collection  of 
items,  no  maximum  rates  of  interest  on  deposits,  no  bor- 
rowing and  loaning  of  balances  at  the  clearing-house,  no 
procuring  of  legislation  relative  to  banking,  no  clearing- 
house loan  certificates,  and  no  bracing  up  of  weak 
members  are  known  to  the  Canadian  clearing-house 
associations.  It  has  been  left  to  the  Canadian  Bankers' 
Association  to  do  whatever  is  possible  in  securing  proper 
legislation  for  the  banks.  The  necessity  for  the  issue  of 
clearing-house  loan  certificates  in  the  United  States,  as 
shown  in  another  chapter,  has  been  due,  in  the  main,  to 
the  lack  of  elasticity  in  our  currency,  and  since  the  bank- 
note issue  in  Canada  obviates  this  weakness,  there  has 
been  no  occasion  for  the  issue  of  such  certificates. 

In  Section  2  of  the  constitution  of  the  Toronto  Clear- 
ing-house, it  is  declared  that  the  association  shall  not  be 


CANADIAN   CLEARING-HOUSES  301 

used,  either  directly  or  indirectly,  as  a  means  of  obtain- 
ing payment  of  any  item,  charge,  or  claim  disputed  or 
objected  to,  and  that  any  bank  receiving  exchanges 
through  the  clearing-house  shall  have  the  same  right  to 
return  any  item,  and  to  refuse  to  credit  any  sum  which 
it  would  have  had  were  the  exchanges  made  directly  be- 
tween the  banks  concerned,  instead  of  through  the 
clearing-house,  and  that  nothing  in  the  rules  shall  de- 
prive a  bank  of  any  rights  it  might  have  possessed  had 
such  rules  not  been  made. 

The  government  of  the  various  Canadian  clearing- 
houses is  vested  in  a  board  of  management,  chairman,  sec- 
retary, and  manager.  The  first  named  corresponds  to  the 
clearing-house  committee  in  the  United  States,  and  per- 
forms similar  duties.  The  board  at  Toronto  consists  of 
seven  bank  officers,  elected  each  year.  At  their  first  meet- 
ing after  their  election  they  choose  out  of  their  own  num- 
ber a  chairman,  a  vice-chairman,  and  secretary-treasurer 
of  the  clearing-house.  At  Halifax  and  Hamilton  the 
cashiers  and  managers  of  the  several  banks  constitute  a 
board  of  management,  the  chairman  of  which  is  elected 
annually.  At  St.  John  Section  3  of  the  Constitution  de- 
clares that  the  managers  or  agents,  or,  in  their  absence, 
the  acting  managers  or  acting  agents  of  the  several 
banks,  shall  constitute  a  board  of  management,  the 
chairman  of  which  shall  be  elected  annually.  The  board 
at  Winnipeg  is  composed  of  a  committee  of  five  bank 
representatives. 

The  chief  duties  devolving  upon  the  several  boards  are 
to  provide  suitable  rooms  for  clearing  and  to  furnish  the 
same  with  stationery  and  furniture,  and  whatever  else  is 


302  CLEARING-HOUSES 

necessary;  to  exercise  general  control  over  the  affairs  of 
the  association;  to  arrange  for  officers  to  act  as  managers 
from  time  to  time,  except  where  this  duty  is  performed 
by  a  clearing-member;  and  to  engage  banks  to  act  as 
clearing-agents  for  the  receipt  and  disbursement  of  bal- 
ances due  by  and  to  the  various  banks. 

At  Montreal  the  Bank  of  Montreal  has  been  the  per- 
manent clearing-agent  since  1891.  Prior  to  that  time  the 
members  acted  in  this  capacity  in  rotation,  as  do  the 
members  in  the  T>ther  clearing-houses  at  the  present 
time.  The  clearing-agent  is  responsible  only  for  the 
money  actually  received  by  it  from  the  debtor  banks  and 
for  the  payment  of  such  money  to  the  creditor  banks. 
Each  clearing-house  makes  its  exchanges  in  a  rented 
room.  The  manager's  duties  are  not  essentially  dif- 
ferent from  those  performed  by  clearing-house  mana- 
gers in  the  United  States,  except  that  in  Canada  they 
are  in  no  way  concerned  with  the  receipt  and  the  dis- 
bursement of  balances  by  the  clearing-bank. 

In  the  beginning  it  was  necessary,  in  order  to  form 
a  clearing-house  in  a  given  centre  in  Canada,  for  all  the 
banks  in  the  place  to  unite  and  become  members,  with- 
out regard  to  their  integrity  and  financial  responsibility. 
Hence,  except  where  numerous  new  banks  are  organized, 
there  are  but  few  to  become  members.  At  Montreal  there 
are  fifteen  members,  at  Toronto  fifteen,  at  Hamilton  and 
Halifax  seven,  and  at  St.  John  five,  making  a  total  of 
forty-seven  banks  belonging  to  these  clearing-houses.  No 
restrictions  in  regard  to  capital  are  placed  upon  applicants 
for  membership,  the  requirement  of  the  General  Banking 
Act  that  each  char-tered  institution  shall  have  at  least  five 


CANADIAN   CLEARING-HOUSES  303 

hundred  thousand  dollars  capital  being  deemed  sufficient 
by  the  clearing-house  to  afford  the  members  a  reasonable 
guarantee  of  its  financial  responsibility. 

So  far  no  occasion  has  arisen  for  any  expulsions,  and 
the  associations  are  practically  without  rules  to  govern 
their  action  in  such  emergencies.  Apparently,  they  did 
not  anticipate  difficulties  of  this  character.  There  is  a 
clause  in  the  Constitution  of  the  Hamilton  Clearing- 
house declaring  that  any  bank  making  default  in  the  pay- 
ment of  its  draft  on  Montreal  for  balances  against  it,  by 
the  specified  time,  or  refusing  to  pay  on  presentation  a 
settlement  draft  given  to  the  clearing-bank,  shall  imme- 
diately cease  to  be  a  member  of  the  association. 

The  terms  upon  which  withdrawals  can  take  place  are 
very  clearly  defined  in  the  several  constitutions,  although 
no  member  has  ever  withdrawn.  The  articles  in  the  dif- 
ferent constitutions  are  substantially  the  same,  but  differ 
slightly  in  phrasing.  The  following  is  from  the  Hamilton 
Constitution :  "  Any  bank  may  retire  from  this  associa- 
tion by  giving  written  notice  to  the  chairman  of  the  board 
between  the  hours  of  i  and  3  o'clock  p.m.,  and  paying 
its  share  of  any  expenses  which  may  be  then  due,  the  re- 
tirement to  take  effect  from  the  close  of  business  of  the 
day  on  which  such  notice  is  given.  It  shall  be  the  duty  of 
the  chairman  to  promptly  notify  the  other  banks  of  such 
withdrawal." 

The  only  failure  that  has  occurred  in  the  clearing-house 
membership  in  Canada  was  that  of  the  People's  Bank  at 
Montreal,  which  liquidated  with  open  doors.  The  failure 
was  the  result  of  maladministration.  The  bank  was  a 
unique  institution,  having  been  organized  at  a  very  early 


304  CLEARING-HOUSES 

day  under  a  private  charter,  which,  once  out  of  existence, 
can  never  be  revived. 

Under  the  branch  system  the  head  office  is  a  member  of 
the  clearing-house  in  the  city  where  it  is  located,  provided 
a  clearing-house  exists  there.  Its  various  branches  which 
are  situated  in  cities  where  clearing-houses  are  located  are 
members  of  the  clearing-house  associations  there.  In  this 
way  a  given  bank  may  be  a  member  of  several  associa- 
tions, and  may  be,  as  well,  a  member  of  one  or  more  asso- 
ciations in  the  United  States,  through  its  branches  located 
in  this  country.  No  such  practice  as  the  clearing  of  non- 
members  through  member-banks  obtains  in  Canada,  the 
occasion  being  avoided  by  the  system  we  have  just  de- 
scribed. 

The  exchange  at  Halifax  takes  place  at  9.30  o'clock;  at 
St.  John  at  9.40  o'clock;  at  Montreal,  Toronto,  and  Win- 
nipeg at  10  o'clock;  and  at  Hamilton  at  10.15  o'clock. 
Each  bank,  at  the  appointed  time,  sends  one  or  more  rep- 
resentatives to  the  clearing-house  with  its  items  and  cur- 
rency, enclosed  in  envelopes,  for  each  of  the  other  banks. 
The  exchanges  are  made  in  the  usual  manner,  after  which 
the  delivery  clerks  return  to  the  several  banks  with  the 
packages,  while  the  settling  clerks  remain  till  the  proof  is 
made.  Ten  minutes  of  grace  are  allowed  at  Montreal  for 
the  arrival  of  the  clerks,  but  in  no  case  will  the  manager 
delay  the  clearings  over  ten  minutes. 

Preliminary  to  his  giving  of  the  signal  to  begin  the  ex- 
changes, the  manager  calls  out,  "  Ready !  "  whereupon 
the  clerks  all  station  themselves  in  their  proper  places, 
and  at  the  tapping  of  the  bell  begin  clearing.  The  desks 
are  so  arranged  that  it  is  necessary  for  the  delivery  clerks 


No.  lO. 

TORONTO  CLEARING  HOUSE. 

IMPERIAL   BANK. 

Delivery  Statement.                                                    1900 

No. 

Bakkb. 

Dr.  Amounts. 

SlQNATUKE. 

NO. 

1 
2 
3 
4 
5 
6 
7 
8 

Bank  of  Montreal 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

Canadian  Bank  of  Commerce- . 
Merchants  Bank  of  Canada-  - . 
Bk.  of  British  North  America. 

Bank  of  Nova  Scotia 

Molsons  Bank 

Bank  of  Toronto 

Ontario  Bank 

g 

10 

11 

12 
13 
14 
15 

Imperial  Bank 

Standard  Bank  

Union  Bank 

Traders  Bank 

Bank  of  Hamilton 

Bank  of  Ottawa 

Form  of  Delivery  Statement  Employed  at  Toronto. 


3o6  CLEARING-HOUSES 

to  pass  along  behind  the  settling  clerks  while  depositing 
their  packages.  Each  carries  a  list  of  the  ''  amounts  de- 
livered "  or  "  delivery  statement,"  upon  v^hich  each  set- 
tling clerk  writes  his  initials  as  a  receipt  against  the 
amount  of  the  package  delivered  to  him,  all  as  shown  in 
one  of  the  illustrations. 

A  small  ticket  containing  the  amount  of  the  packages 
is  attached  to  the  exterior,  and  immediately  upon  re- 
ceiving the  package,  the  settling  clerk  detaches  the 
ticket  and  transcribes  the  amount  on  his  settling  sheet. 
In  this  manner  all  the  amounts  are  listed,  after  which 
the  footings  are  made  and  the  difference  taken  between 
the  amounts  delivered  and  the  amounts  received — such 
difference  constituting  the  credit  or  debit  balance. 

Before  the  exchanges  begin,  the  manager,  at  his  desk 
in  one  corner  of  the  room,  receives  from  each  clerk  as  he 
enters  the  room  a  "  First  Delivery  Voucher,"  containing 
the  amount  of  the  exchanges  brought  to  the  clearing- 
house. 

Each  settling  clerk,  immediately  upon  striking  his 
balance  at  the  conclusion  of  the  exchanges,  makes  out 
what  is  called  the  "  Second  Delivery  Voucher,"  contain- 
ing the  amount  received,  amount  delivered,  and  the  bal- 
ance, and  hands  the  same  to  the  manager.  This,  in  the 
Toronto  Clearing-house,  is  in  the  general  shape  of  a 
check,  say  three  and  one-half  inches  deep  by  eight  inches 
long.    A  fac-simile  appears  among  the  illustrations. 

The  manager  immediately  transcribes  the  amount  re- 
ceived and  the  balance  on  his  settling  sheet  (the  amounts 
delivered  having  been  already  transcribed),  and  proceeds 
to  foot  up  the  four  columns  and  strike  the  balance.    The 


c 

1   . 

1            i 

j 

CC 

1 

i              i 

U) 

«*. 

i              i 

3 

i 

i 

O 

j 

(9 

i 

$ 

• 

i 

^ 

i 

K. 

K 

i 

Ul 

.,■■ 

CO 

^ 

I 

CO 

: 

:d 

^ 

^ 

s 

0 

1 

(D 

0 

' 

^ 

!SC 

ck: 

£ 

^ 

'SC 

^ 

^ 

UJ 

c 
Q: 
c 

o 

p: 

K 

^ 

s 

1 

. 

Q: 

1 

o 

K 

K 

1 

i 

i 

• 

o 

Q 

i 
1 

* 

i 

<0 

0 

1 

UJ 

^ 

^ 

i 

£      i 

308  CLEARING-HOUSES 

form  employed  for  this  purpose  is  shown  among  the  illus- 
trations. 

If  the  amounts  delivered  and  amounts  received  agree, 
and  the  amount  due  to  the  clearing-house  and  the  amount 
due  by  the  clearing-house  tally,  the  work  is  correct  and 
the  result  is  so  announced  by  the  manager.  But  if  there 
is  a  discrepancy,  the  settling  clerks  examine  their  sheets 
anew,  and  if  it  is  found  in  the  exchanges,  they  make  a  new 
footing  of  the  columns  and  also  compare  the  amounts  on 
the  small  tickets  with  the  amounts  listed  therefrom  on 
their  sheets.  If  the  error  remains  undiscovered,  the 
clerks  call  off  to  each  other  to  see  if  the  amounts  deliv- 
ered agree  with  the  amounts  received.  If  the  footings 
have  been  made  correctly  this  ought  to  disclose  the  error. 

If,  on  the  other  hand,  the  discrepancy  occurs  in  the 
amount  due  to  the  clearing-house  and  the  amount  due 
by  the  clearing-house,  it  is  the  result  of  an  error  in  sub- 
traction, provided  there  is  no  error  in  the  columns  of  ex- 
changes. Such  an  error  is  rectified  by  a  revision  of  this 
part  of  the  work.  The  manager  sounds  the  little  bell,  to 
indicate  that  the  proof  is  made,  whereupon  the  settling 
clerks  repair  to  their  separate  banks  with  their  second  de- 
livery vouchers.  The  delivery  clerks,  as  already  noted, 
return  with  the  items  received  to  their  respective  banks 
at  the  conclusion  of  the  exchanges. 

At  II  o'clock  the  manager  returns  to  the  clearing- 
house and  makes  out  a  list  of  the  balances,  which  is  used 
as  a  basis  of  settlement  at  the  clearing-bank.  At  the 
same  time  he  signs  the  vouchers  made  out  by  the  set- 
tling clerks,  indicating  the  amount  of  the  credit  or  debit 
balance,  as  the  case  may  require.     The  credit  vouchers 


C 

y 

• 

2 

) 

i  i 

1 

i 

1 

H 

i            ^ 

^ 

Uj 
0) 

c 

\    \ 

1 

: 
1 

:d 

'■    s 

:t 

1 

o 

K 

t 

1 

c 

;   ^ 

i 

1 

(D 

d 

1 

^ 

i 

i 

; 

2 

5 

c 

:    2 

i 

i 
1 

Uj 

2 

^1 

d 

1 

d 

c 
ft 
c 

!     a 

Q 

o 

K 

0 

1 

1 

S 

1 

^ 

^ 

S 

O 

2 

6 

K 

i 

Q 

1 

d 

1 

^ 

% 

K 

O 

5 

Li 

^ 

S 

o 

310  CLEARING-HOUSES 

are  printed  in  black  ink  and  the  debit  vouchers  in  red 
ink,  each  being  countersigned  by  the  settHng  clerk. 
Across  the  face  of  the  credit  voucher  is  written  the  re- 
ceipt for  the  balance,  and  the  ticket  is  delivered  to  the  set- 
tling bank  when  the  balance  is  received;  and  on  the  face 
of  the  debit  voucher  is  the  receipt  for  the  balance  paid 
into  the  clearing-bank,  such  receipt  being  signed  by  the 
teller  of  the  clearing-bank  and  retained  by  the  debit  bank. 

The  clearing-houses  in  the  United  States  take  no  cog- 
nizance of  errors  in  the  items  contained  in  the  packages, 
but  leave  to  the  banks  interested  the  adjustment  of  any 
diflFerence  that  may  arise;  but  in  Canada  a  different  cus- 
tom prevails.  At  Montreal  the  banks  have  until  11.30 
o'clock  to  examine  the  items  received  in  the  morning  ex- 
changes and  to  return  any  voucher  for  five  thousand  dol- 
lars or  more,  on  the  ground  of  no  funds  or  not  sufficient 
funds,  whereupon  it  is  the  manager's  duty  to  demand  a 
new  settlement.  It  would  not  be  regarded  expedient  nor 
desirable  to  return  to  the  clearing-house  at  11  o'clock, 
were  it  not  for  the  advantages  thus  afforded  the  banks  of 
making  such  examinations  of  their  items,  and,  if  the  case 
may  require,  of  demanding  a  new  settlement. 

The  occasions  are  exceedingly  rare  when  a  new  settle- 
ment is  necessary,  and  it  is,  therefore,  regarded  by  many 
members  as  an  unnecessary  sacrifice  of  time  and  energy 
for  the  manager  to  return  to  the  clearing-house  to  list  the 
balances  and  to  sign  the  vouchers.  It  may  well  be  asked 
whether  it  would  not  be  an  equally  safe  and  more  con- 
venient arrangement  as  well  to  dispose  of  this  work  im- 
mediately after  striking  the  original  balance,  with  the  un- 
derstanding that  any  bank,  finding  it  necessary  to  do  so, 


d           M 

o 
c 

)               ^ 

>         1         . 

a> 

.               i 

'■"" 

o 

» 

d 

g 

H 

3 

Q 

i 

1        Q 

1       H 

H  - 

> 

^ 

'        W 

u. 

,        ^ 

c 
c 

'1 

)    i! 

DC 

i 

0^ 

1    |i  ^ 

02 

1    i^  1 

cn 

)    i' 

c 

) 

1       » 

_ 

D: 

-»      s 

<      = 

u 

c 

^  1  ? 

z 

-  '  1 

^l^_ 

:,    i!  « 

DC 

•     •    < 

U: 

1  ! 

:    :  y 

c 

1 
> 

OMMERC 

Canada 

RTH  Am 

<n 

O    P.    5    p 

c 

^                  5           i 

o    «    n:   c^ 

O 

H     < 

2 

«           1 

Bank 
TS  Ban 
Britis 
Nova 
Bank. 

ToRON 

Bank  . 
Bank 
Bank 

)  Bank 

Bank. 
Hamil 
Ottaw 

C 

)                               I 

<    <    S    fe    S   fe   2   2    ^    S?  «    ^   S   § 

DC 

i                                        2 

C 

)           ^ 

<W<<0<Z0|PZK<< 

^              6          . 

w      ro-^in\0      r^oo      o>0      w      M      oiTi-in 

312  CLEARING-HOUSES 

should  be  permitted  to  return  its  voucher,  in  the  same 
manner  and  under  the  same  conditions  as  above,  pro- 
vided the  manager  is  notified  before  12  o'clock,  or  any 
other  hour  agreed  upon,  of  the  same  day. 

At  Toronto  a  bank  objecting  to  any  item  delivered  to  it 
through  the  clearing-house,  or  to  any  charge  against  it 
in  the  exchanges  of  the  day,  is  required,  before  notifying 
the  manager  of  the  objection,  to  apply  to  the  bank  inter- 
ested for  payment  of  the  amount  of  the  item  or  charge 
objected  to,  and  such  amount  must  be  immediately  paid 
to  the  objecting  bank.  Should  such  payment  not  be 
made,  the  objecting  bank  may  before,  but  not  after,  12 
o'clock  notify  the  clearing-house  manager  of  such  ob- 
jection and  non-payment,  and  he  must  thereupon  deduct 
the  said  amount  from  the  settling  sheets  of  the  banks 
concerned  and  readjust  the  clearing  statements  and  de- 
clare the  correct  balance,  in  conformity  with  the  changes 
so  made.  It  will  be  observed  that  this  differs  somewhat 
from  the  Montreal  plan. 

At  Toronto  the  manager  is  not  required  to  return  to  the 
clearing-house,  unless  an  item  is  objected  to.  An  effort 
is  made  by  the  objecting  bank  to  adjust  the  difference 
with  the  other  bank  before  calling  upon  the  manager  for 
a  new  settlement,  and  no  minimum  amount  is  specified 
of  the  amount  of  the  item  that  may  be  objected  to. 

At  Halifax  all  errors  in  the  exchanges  and  claims, 
arising  from  the  return  of  checks  or  from  other  causes, 
must  be  adjusted  by  11.45  o'clock  of  the  same  day, 
directly  between  the  banks  concerned  and  not  through 
the  clearing-house,  except  in  case  of  the  refusal  or  ina- 
bility of  a  bank  to  promptly  refund  to  the  bank  present- 


1 

<0            J 

J 

Q:         iw 

<3> 

'^           5 

«0 

^          U 

■"^ 

i      -J          * 

o         i^ 

• 

1    Q 

is        13 

i      IS 

^ 

i      ii 

^ 

s 

0 

:  -4 

o 

(0 

i    I!; 
1    0 

■ 

! 

:3 

1    ^ 

1 
I 

o 

? 

[ 

3: 

IS 

i  i^ 

Q:    ^K.. a:- 

\ 

\ |.. 

5 

K      y 

-J 

o 

UJ 

i 

o 

-I 

•2A/^At^c 

'  03 

AI303d^ 

o 

•^ 

t 

o 

u 

o 

K 

• 

» 

K 

^' 

S 

o 

Q 

% 

UJ 

o 

CO 

1 

i 

ARINQ   HOU 

Q 
(3 

s  1 

o 

ERSh 

j 

K 

d 

e  ^ 

i 

8 

314  CLEARING-HOUSES 

ing  such  checks,  drafts,  or  other  items  returned,  when 
the  banks  holding  them  must  report  to  the  clearing- 
bank  the  amount  of  the  same,  and  it  is  the  duty  of  the 
clearing-bank  to  take  from  the  settling  sheets  of  both 
banks  the  amount  of  such  items  and  readjust  the  clear- 
ing statements  and  declare  the  correct  balance,  accord- 
ing to  the  changes  so  made,  provided  such  report  is 
given  to  the  cashier  or  manager  of  the  clearing-bank 
not  later  that  12  o'clock  of  the  same  day. 

At  St.  John  practically  the  same  rule  is  in  force,  ex- 
cept that  all  claims  of  one  bank  upon  another,  arising 
from  the  causes  above  described,  must  be  paid  in  legal- 
tender  notes,  immediately  on  demand  of  the  returning 
bank,  and  in  case  of  non-payment  it  is  necessary,  in  order 
to  obtain  a  new  settlement  through  the  clearing-house, 
to  notify  the  manager  of  the  non-payment  before  11.30 
o'clock  instead  of  12  o'clock,  as  in  the  former  instance. 

At  Hamilton  such  errors  must  be  adjusted  by  11.30 
o'clock  of  the  same  day,  directly  between  the  banks  con- 
cerned, and  to  secure  a  new  settlement  through  the  clear- 
ing-house a  report  of  the  amount  of  the  discrepancy  must 
be  made  to  the  cashier  or  manager  of  the  clearing-house 
not  later  than  12  o'clock  of  the  same  day,  as  compared 
with  1 1.30  o'clock  at  St.  John. 

Balances  resulting  from  the  morning  exchanges  are 
paid  by  the  debtor  banks  at  Halifax  between  11.30 
o'clock  and  12.30  o'clock,  and  at  all  the  other  associa- 
tions between  12  o'clock  noon  and  12.30  o'clock,  and  in 
each  case  they  are  paid  not  to  the  manager  at  the  clear- 
ing-house, but  to  the  bank  selected  to  act  as  clearing- 
agent.     Drafts  on  Montreal  are  used  at  Hamilton  as  the 


(0 

tt 

ft 

0>                      i        ^ 

5 

«                      *^ 

% 

>                1      ^ 

2 

O 

$ 

ui             Q 

li 

CO 

s 

Q 

^ 

i: 

I 

o 

i 

2 

^    1 

* 

hi 

CO       ! 

o 

^ 

-.        I 

, 

^ 

LEAR 

o 

o 

0 

3: 

UJ 

CD 

0 

^_ 1 

'    , 

^         "^             1 

$■■" 

5 

51 

o     ^        1 

^AI303d^ 

ti; 

^  ?    1 

5 

c 

0 

it 

4 

! 

1 

fe 

0 

o 

^ 

% 

^ 

o 

5 

K 

-J 

S 

Q 

Q: 

a    . 

s    \ 

i 

d 

^  \ 

S 

*i 

K 

, 

1           \ 

^          1 

0 

1         j 

:) 

5   %. 

>» 

8    i 

■s 


1 


3i6  CLEARING-HOUSES 

medium  of  settlement,  and  Dominion  legal-tender  notes 
of  large  denominations  at  all  the  other  clearing-houses. 

The  different  associations  vary  not  a  little  in  their 
method  of  dealing  with  members  making  default  in  the 
payment  of  balances  within  the  specified  time.  At  Ham- 
ilton, where  settlements  are  made  by  drafts  on  Montreal, 
no  rules  are  laid  down  for  the  guidance  of  the  association. 
At  Winnipeg  a  bank  failing  to  pay  its  balance  within  the 
appointed  time,  is  required  to  return  all  items  received 
through  the  exchanges  before  12.30  o'clock,  unmarked 
and  unmutilated,  to  the  clearing-house,  whereupon  each 
of  the  other  banks  is  notified  of  such  action  and  required 
to  return  immediately  to  the  clearing-house  all  items 
which  may  have  been  received  from  the  bank  in  default, 
or  pay  the  amount  thereof  to  the  clearing-house,  and 
the  clearing-house  manager  is  required  to  adjust  the 
settlement  of  balances  anew. 

At  Halifax  the  banks  holding  items  against  the  default- 
ing bank  are  required  to  furnish  forthwith  to  the  clearing- 
bank  the  amount  of  such  balance  in  proportion  to  their  re- 
spective balances  against  the  defaulting  bank,  resulting 
from  the  exchanges  of  that  day,  and  the  amounts  so  fur- 
nished to  the  clearing-bank  constitute  claims  on  the  part 
of  the  responding  banks  respectively  against  the  default- 
ing bank.  The  same  rule  obtains  at  St.  John  as  at  Win- 
nipeg, but  at  Toronto  the  case  is  peculiar.  The  rule  is 
as  follows: 

"  Should  any  bank  make  default  in  paying  to  the  clear- 
ing-bank its  debit  balance  within  the  time  fixed  by  this 
rule,  such  debit  balance  and  interest  thereon  shall  then 
(thereafter)  be  paid  by  the  bank  so  in  default  to  the  chair- 


CANADIAN   CLEARING-HOUSES  317 

man  of  the  clearing-house  for  the  time  being  (interven- 
ing), and  such  chairman  and  his  successor  in  office  from 
time  to  time  shall  be  a  creditor  of  and  entitled  to  recover 
the  said  debit  balance  and  interest  thereon  from  the  de- 
faulting bank.  Such  balances,  when  received  by  the  said 
chairman  or  his  successor  in  ofifice,  shall  be  paid  by  him  to 
the  clearing-bank  for  the  benefit  of  the  banks  entitled 
thereto." 

At  Hamilton,  besides  the  regular  checks,  only  certi- 
fied notes  and  bills  of  exchange  are  received  through  the 
clearing-house.  Sight  drafts  and  uncertified,  as  well  as 
certified,  items  are  considered  proper  matter  for  clearing 
at  Toronto.  At  Winnipeg  drafts,  notes,  and  bills  of  ex- 
change are  not  cleared  unless  certified  by  the  banks  on  the 
previous  day.  At  Montreal,  owing  to  keen  competition 
between  the  banks,  certification  of  such  items  on  the  pre- 
vious day  is  not  always  required. 

In  addition  to  checks,  drafts,  notes,  and  bills  of  ex- 
change, bank-notes  are  cleared  in  all  the  Canadian  clear- 
ing-houses. This  constitutes  one  of  the  most  interesting 
and  important  features  of  the  exchange.  In  the  daily 
course  of  business,  each  bank  in  a  given  city  receives 
notes  issued  by  the  other  banks.  These  are  assorted  ac- 
cording to  the  banks  issuing  them,  and  carefully  counted, 
as  a  rule,  by  two  persons,  and  placed  in  packages,  which 
are  placed  in  still  larger  packages,  containing  checks 
and  other  items,  and  then  sealed  and  sent  through  the 
exchanges  on  the  following  day  for  redemption.  The 
amount  of  currency  thus  cleared  from  day  to  day  va- 
ries from  ten  to  twenty  per  cent,  of  the  other  exchanges. 

None  of  the  Canadian  clearing-houses  require  state- 


3 1 8  CLEARING-HOUSES 

ments  of  their  condition  from  the  member-banks.  A  sat- 
isfactory knowledge  of  their  standing  is  obtained  through 
the  monthly  statements  required  by  Section  85  of  the 
General  Banking  Act.    The  section  in  full  is  as  follows : 

''  Monthly  returns  shall  be  made  by  the  bank  to  the 
Minister  of  Finance  and  Receiver-General  in  the  form  set 
forth  in  Schedule  D  to  this  act,  and  shall  be  made  up  and 
sent  in  within  the  first  fifteen  days  of  each  month,  and 
shall  exhibit  the  condition  of  the  bank  on  the  last  juridical 
day  of  the  month  next  preceding;  and  such  monthly  re- 
turns shall  be  signed  by  the  chief  accountant  and  by  the 
president  or  vice-president  or  the  director  or  principal 
partner  then  acting  as  president,  and  by  the  manager, 
cashier,  or  other  principal  oflficer  of  the  bank  at  its  chief 
place  of  business.  Every  bank  which  neglects  to  make  up 
and  send  in,  as  aforesaid,  any  monthly  return  required  by 
this  section,  within  the  time  hereby  limited,  shall  incur  a 
penalty  of  fifty  dollars  for  each  and  every  day  after  the 
expiration  of  such  time  during  which  the  bank  neglects 
so  to  make  up  and  send  in  such  return;  and  the  date  upon 
which  it  appears,  by  the  post-office  stamp  or  mark  upon 
the  envelope  or  wrapper  enclosing  such  return  for  trans- 
mission to  the  Minister  of  Finance  and  Receiver-General, 
that  the  same  was  deposited  in  the  post-ofifice,  shall  be 
taken  prima  facie  for  the  purposes  of  this  section  to  be 
the  date  upon  which  such  return  was  made  up  and  sent 
in." 

In  addition,  the  Minister  of  Finance  and  Receiver-Gen- 
eral may  call  for  special  returns  from  any  bank,  when- 
ever it  may  be  deemed  necessary  to  afford  a  full  and  com- 
plete knowledge  of  its  condition,  and  any  bank  failing  to 


CANADIAN   CLEARING-HOUSES  319 

send  in  such  special  return  within  thirty  days  from  the 
date  of  the  demand  therefor  by  the  Minister  of  Finance 
and  Receiver-General  incurs  a  penalty  of  five  hundred 
dollars  a  day  for  the  continuance  of  such  neglect.  The  re- 
turns are  very  exhaustive.  Eleven  items  are  included  un- 
der liabilities,  and  twenty-one  under  assets,  besides  many 
items  of  a  general  character  not  included  under  either. 

The  transactions  at  the  Canadian  clearing-houses  are 
recorded,  but  in  no  case  are  those  records  extensive  and 
elaborate.  They  agree  in  the  main  with  the  records  kept 
by  similar  associations  in  the  United  States.  At  Mont- 
real a  record,  is  kept  of  the  amounts  brought  or  delivered 
at  the  clearing-house,  with  totals  of  the  same  for  each 
year.  No  book  with  copies  of  the  manager's  proof-sheet 
is  kept,  as  is  commonly  done,  but  the  proof-sheets  them- 
selves are  preserved.  The  other  associations  keep  more 
or  less  extensive  records  of  the  most  important  and  es- 
sential parts  of  the  daily  transactions.  The  expenses  are 
always  divided  equally  among  the  members,  and,  as  a 
rule,  are  paid  quarterly.  The  manager  and  the  paying 
teller  at  the  clearing-bank  commonly  receive  a  small 
compensation,  while  in  the  smaller  associations  little 
more  than  the  expense  of  printing  is  required. 

In  no  case  are  fines  imposed,  although  the  need  of  some 
such  deterrent  force  is  not  infrequently  felt.  Something 
of  this  soft,  it  would  seem,  is  necessary  to  secure  prompt- 
ness in  the  discharge  of  the  various  duties  connected  with 
the  exchanges  and  the  management  of  the  clearing-house 
affairs.  In  this  neglect  (if  such  we  may  call  it)  the  Cana- 
dians have  followed  their  English  cousins  rather  than 
their  American  neighbors. 


320  CLEARING-HOUSES 

The  clearings  of  the  several  clearing-houses  in  Canada 
for  twelve  months,  December  to  November  inclusive, 
1897-98,  as  compared  with  the  same  period  1898-99,  are 
given  below : 

1897-98  1898-99 

Montreal $718,624,000  $794,197,000 

Toronto    430,140,000  501,314,000 

Halifax  61,276,000  68,386,000 

Hamilton    3S,392,ooo  39,898,000 

Winnipeg    90,746,000  105,524,000 

St.  John  29,336,000  32,405,000 

The  clearings  in  Vancouver  and  Victoria  for  the  same 
period  in  1898-99  were  as  follows: 

1898-99 

Vancouver    $41,325,000 

Victoria    33,369,000 

The  branch  system  of  banking,  in  which  the  parent  in- 
stitution is  virtually  a  member  of  several  clearing-houses, 
renders  a  uniform  set  of  rules  for  the  several  houses  a  de- 
sideration,  and  such  a  reform  in  the  near  future  may  rea- 
sonably be  expected.  Other  features,  such  as  the  adop- 
tion of  a  separate  exchange  for  notes  by  the  association  at 
Montreal,  and  a  system  of  fines  by  all  the  associations, 
may,  in  time,  be  introduced. 


CHAPTER   XIX 

THE   LONDON   CLEARING-HOUSE 

Early  History — Stimulated  by  the  Example  of  New  York — 
"  Out-clearers  "  and  "  In-clearers  " — Morning  Clearings  and 
Afternoon  Clearings — The  Final  Balance — Detail  of  Methods. 

The  utility  of  clearing-houses  has  been  dwelt  upon  in 
other  pages  of  this  book.  The  history  of  the  clearing- 
house in  America  has  also  been  set  forth,  but  in  that  his- 
tory there  has  been  no  indication  that  the  clearing-house 
system  of  this  country  was  borrowed  from  that  of  any 
other.  In  fact,  it  appears  that  a  clearing-house,  in  what- 
ever general  division  of  the  world  it  may  exist,  is  a  growth 
or  development,  something  proceeding  from  well-defined 
causes  and  springing  into  existence  to  meet  a  clearly  ex- 
pressed want.  It  is  possible,  and  even  probable,  that 
some  of  those  who  were  responsible  for  the  organization 
of  the  first  clearing-house  in  America  knew  somewhat  of 
the  existence  of  the  clearing-house  in  London,  but  that 
the  latter  was  inadequate  as  a  foundation  upon  which  to 
base  the  American  institution  or  exercised  any  influ- 
ence upon  the  plans  of  these  projectors  will  be  perceived 
at  once  by  the  reader  of  the  particulars  of  the  great 
English  institution  which  follow. 

The  origin  of  the  London  Clearing-house  seems  to  be 
shrouded  in  doubt  and  uncertainty.    It  was  presumably 

321 


322 


CLEARING-HOUSES 


at  the  outset  an  institution  of  so  little  importance  that  the 
historians  of  the  day  paid  no  attention  to  it.  It  was  a  mere 
convenience  to  bankers  and  an  adjunct  that  had  not  de- 
veloped into  any  considerable  importance.  The  history 
of  the  institution,  as  recorded,  goes  back  as  far  as  1773, 
for  on  that  date,  in  the  books  of  Martin  &  Co.,  bankers 
of  London,  appears  the  entry  of  a  charge  for  the  use 
of  the  clearing-room.  The  rent  for  a  quarter  would 
appear  to  have  been  19s.  6d.,  certainly  not  an  exorbitant 
charge  nor  one  to  indicate  either  expensive  or  elaborate 
quarters. 

After  this  gleam  of  light,  merely  showing  that  the  insti- 
tution existed,  darkness  again  settles  over  the  subject, 
but  it  is  believed  that  in  1775  a  building  in  Lombard 
Street  was  used  by  the  bankers  of  the  English  metropolis 
for  clearing  purposes.  The  evidence  of  this  fact,  as  ap- 
pears by  the  writings  of  English  financial  historians  who 
have  investigated  the  subject,  is  not  at  all  positive.  It  is 
recorded  of  the  early  London  Clearing-house  that  the 
object  in  view  was  that  of  reducing  the  amount  of  actual 
money  to  be  used  in  settlements,  a  fact  which  shows  that 
the  effort,  by  whatever  name  it  was  called  and  however 
managed,  was  along  the  same  general  lines  as  are  followed 
by  the  clearing-houses  of  the  present  day. 

From  this  early  beginning,  the  system  that  is  now  in 
use  in  London  was  undoubtedly  developed.  It  further 
appears,  by  the  meagre  scraps  of  history  that  are  avail- 
able, that  at  the  outset  many  of  the  bankers  of  London 
were  opposed  to  the  idea  of  co-operative  clearings,  but 
as  the  advantages  of  the  method  were  developed  this  op- 
position was  gradually  withdrawn,  and  early  in  the  cen- 


THE   LONDON    CLEARING-HOUSE  323 

tury,  say  about  18 10,  no  less  than  forty-six  banking  con- 
cerns were  represented  in  the  London  Clearing-house. 
No  authentic  records,  however,  have  been  discovered  of 
the  transactions  of  the  clearing-house  of  a  date  earlier 
than  1840,  and  those  which  are  available  for  inspection, 
at  even  that  comparatively  recent  date,  are  so  imperfect 
and  contain  so  little  detail  as  to  be  of  small  value. 

After  the  New  York  Clearing-house  had  been  estab- 
lished and  had  demonstrated  its  right  to  existence  it  at- 
tracted the  attention  of  London  bankers.  It  was  not  until 
the  new  world  had  set  an  example  in  this  respect  that 
English  bankers  began  to  give  serious  attention  to  those 
details  of  clearing-house  work  which  are  at  present  so 
highly  valued  everywhere.  It  was  at  that  time  that  statis- 
tics of  transactions  began  to  be  systematically  collected 
and  tabulated.  The  relatively  perfect  system  established 
in  New  York  aroused  the  managers  of  the  London  Clear- 
ing-house to  an  appreciation  of  the  advantage  of  correct 
records,  and  caused  them  to  introduce,  in  part  at  least, 
some  of  the  methods  which  New  York  had  put  into 
operation. 

The  present  London  Clearing-house  is  situated  in 
Post-ofifice  Court,  Lombard  Street.  The  clearing-room 
is  on  the  ground-floor.  Architecturally,  the  building 
has  very  little  to  recommend  it.  Practically,  there  is 
little  more  than  an  entrance-door  and  windows  for  let- 
ting light  into  the  clearing-room.  The  general  appear- 
ance of  the  entrance  may  be  gained  by  a  glance  at  the 
frontispiece  of  this  book,  which  is  a  reproduction  of  a 
recent  photograph. 

That  the  methods  in  vogue  in  the  London  Clearing- 


324  CLEARING-HOUSES 

house  differ  materially  from  those  employed  in  New 
York,  or  in  the  other  leading  clearing-houses  of  Amer- 
ica, will  perhaps  be  assumed  by  everyone  who  has  con- 
trasted English  and  American  methods  of  banking.  It 
would  seem  as  a  fact  that  our  English  cousins  have  not 
succeeded  in  those  labor-saving  details  and  refinements 
of  method  which  are  so  thoroughly  identified  with 
American  practice.  Even  a  casual  inspection  of  the 
methods  of  work  in  the  London  Clearing-house  shows  at 
once,  by  sharp  contrast,  the  advantages  of  American 
drill  and  discipline,  as  exemplified  in  the  New  York 
Clearing-house. 

To  show  that  we  are  not  speaking  from  a  standpoint 
of  prejudice  in  this  regard,  we  present  herewith  an  ex- 
tract from  a  work  by  W.  Howarth,  Fellow  of  the  Royal 
Historical  Society,  published  in  London  in  1884, 
which  may  be  regarded  as  a  strictly  disinterested  de- 
scription : 

"  The  men  who  transact  the  clearing  business  for  the 
various  banks  are  called  *  clearers.'  Each  bank  has  two 
sets  of  books  ruled,  the  columns  being  headed  with  the 
names  of  the  different  clearing-banks.  One  of  these  sets 
is  used  at  the  bank  itself,  the  other  at  the  house.  The 
men  who  enter  in  the  '  clearing-books '  (as  they  are 
called)  in  the  bank  are  called  *  outclearers,'  while  the 
men  whose  work  is  in  the  *  house '  are  in  like  manner 
designated  the  '  inclearers.' 

"  The  *  outclearers  '  in  the  morning  send  the  various 
cheques  secured  by  their  bank  on  the  other  clearing- 
banks,  in  alphabetical  order,  having  done  which,  they  at 
once  enter  them  in  the  '  outclearing '  books  under  the 


THE   LONDON    CLEARING-HOUSE  325 

names  of  the  different  banks.  When  the  first  lot  is  en- 
tered, the  batches  of  cheques,  or  '  charges,'  as  they  are 
called,  on  the  respective  banks,  are  cast  up,  the  cheques 
pinned  together,  or  '  screwed  up,'  and  the  total  entered 
on  the  back  of  the  last  article. 

'*  When  all  this  is  done,  the  clerk  takes  the  charges, 
numbering  in  all  2y,  and,  placing  them  in  his  case,  makes 
off  for  the  house,  where  he  is  supposed  to  be  between  10 
A.M.  and  II  A.M.  Arriving  there  he  goes  around  the 
building,  depositing  his  charges  on  the  desks  of  the  dif- 
ferent banks  on  whom  the  drafts  are  drawn.  Each  bank 
does  this,  and  consequently,  as  there  are  twenty-eight 
banks  in  the  house,  the  '  inclearers'  will  find  on  their  desks 
on  their  arrival,  or  shortly  after,  twenty-seven  bundles  of 
cheques,  etc.  The  '  inclearers  '  take  with  them  the  *  in 
books '  and  at  once  enter  the  various  charges  under  the 
headings  of  the  several  banks,  casting  each  when  entered, 
and  seeing  if  the  cast  corresponds  with  the  total  on  the 
back  of  the  last  cheque.  Should  the  totals  not  agree,  the 
clerk  sings  out  in  a  loud  voice  the  name  of  the  bank  with 
whose  total  he  differs,  and  the  representative  of  that  bank 
is  obliged  to  go  to  the  desk  of  the  complainant  and  take 
with  him  his  *  outbooks.'  The  items  are  then  run  over 
and  the  mistake  detected  and  rectified.  When  the  *  in- 
clearer  '  has  entered  and  agreed  all  the  charges  on  his 
desk,  he  puts  the  cheques,  etc.,  in  his  case,  and  returns  to 
his  office,  taking  with  him  his  '  outbooks.' 

"  The  morning  clearing  is  generally  over  by  noon.  On 
arriving  at  his  bank,  the  clearer  hands  the  drafts  over  to 
the  clerk  whose  business  it  is  to  pay  the  clearings,  who 
examines  the  articles,  and  if  everything  be  regular,  and 


326  CLEARING-HOUSES 

the  customers  have  the  money,  pay  them.  The  afternoon 
clearing  commences  at  2.30  p.m.,  by  which  the  '  out- 
clearer  '  has  repeated  the  process  already  described  as 
comprising  the  morning  out-work;  and  a  runner  is  de- 
spatched to  deliver  the  charges  as  in  the  morning.  As  the 
'  outclearer '  receives  drafts  from  the  waste  book  and 
other  sources,  he  sorts  and  enters,  but  seldom,  except 
on  a  very  slack  day,  has  time  to  put  an  amount  on  any 
but  the  first  lot.  Thus  he  goes  on  till  4  o'clock,  when, 
the  cashiers  taking  no  more  credits,  he  receives  no  more 
cheques;  he  then  casts  his  books  and,  taking  them  with 
him,  proceeds  to  the  house. 

''  In  the  meanwhile  the  '  inclerk  '  is  also  at  his  post  at 
2.30  p.  M.  and  finds  awaiting  him  several  charges  which 
he  enters  on,  as  a  continuation  of  the  morning  work.  As 
the  time  passes  the  runner  makes  his  appearance  more 
frequently  and  the  charges  drop  on  his  desk  often,  and  still 
more  often.  The  runner  from  his  own  bank  also  con- 
stantly takes  from  his  book  the  charges  he  has  '  dealt 
with,'  hastens  with  them  to  his  office,  and  hands  them  to 
the  paying  clerks,  who  examine  and  despatch  them  with 
all  speed  to  the  men  on  the  cash  books  or  ledgers. 

"  The  house  is  prone  to  indulge  in  a  little  fun  during 
the  early  afternoon,  occasionally  bursting  forth  with  a 
*  gloria '  or  bit  of  the  National  Anthem,  or  other  vocal 
display  not  quite  so  edifying,  but  as  three  o'clock  comes 
and  goes,  the  pressure  of  work  leaves  no  time  for 
foolish  frivolity. 

"  Between  half-past  three  and  four,  nought  is  heard  but 
the  hurried  tread  of  the  runners,  the  dropping  of  the 
charges,  the  scratching  of  the  pens,  and  the  rustling  of 


THE   LONDON    CLEARING-HOUSE  327 

paper,  as  the  '  inclearers  '  with  lightning-like  rapidity  run 
the  items  in  their  in-books  and  cast  them  up. 

"  A  quarter  to  four :  the  passages  are  thronged,  the 
pressure  more  intense,  the  pens  of  the  clerks  seem  like  ex- 
press trains  running  down  inclines,  so  great  is  their  rate  of 
movement,  the  charges  are  more  frequent  and  heavy,  and 
drop  about  the  books  and  heads  of  the  poor  clearers  like 
hailstones  in  a  thunder-storm.  Five  minutes  to  four :  if 
anything  a  still  harder  pull.  Four  o'clock :  the  runners 
are  pouring  in  fast,  bawling  out  their  names,  and  almost 
more  than  that,  for  they  rush  in  and  out  of  the  building 
like  so  many  men  escaped  from  Bedlam. 

"  Five  minutes  past  four :  the  white  hand  of  the  three- 
handed  clock,  which  is  just  five  minutes  behind  the  min- 
ute hand,  is  on  the  four;  the  bell  strikes;  the  doors  are 
bolted,  and  from  all  parts  of  the  room,  in  various  keys, 
sometimes  harmonious,  though  often  otherwise,  there 
arises  a  prolonged  *  oh,  oh,  oh,  oh ! '  a  kind  of  raising  the 
safety-valve,  a  letting  ofif  of  surplus  steam,  a  returning  to 
the  ordinary  pressure  of  their  business,  after  having  been 
for  so  long  screwed  up  to  such  an  abnormally  high  ten- 
sion. The  striking  of  the  bell  at  4.05  p.m.,  regulates  the 
closing  of  the  door,  which  means  the  cessation  of  any  de- 
livery of  charges  other  than  those  in  the  house  at  the 
time. 

''  At  ten  minutes  past  four,  the  bolts  are  again  drawn 
and  a  general  stampede  takes  place  of  runners  hurrying 
with  the  '  last  lot  of  stuff '  to  their  several  banks,  the  re- « 
ceipt  of  which  sets  the  whole  of  the  internal  machinery  of 
the  great  clearing-banks  running  with  redoubled  vigor. 

"  But  the  house !  as  soon  as  the  '  inclearer  *  has  got  all 


328  CLEARING-HOUSES 

the  charges  off  his  desk — in  other  words,  when  he  has 
entered  the  last  check  or  draft — he  casts  his  book.  By 
the  time  he  has  finished  doing  this,  the  '  outclearer/ 
as  already  mentioned,  has  made  his  advent  at  the  house, 
bringing  with  him  his  *  outbooks.'  Most  of  the  smaller 
banks  divide  the  clearing-banks  into  two  sets,  and  use 
two  books,  making  one  book  do  for  each  set,  and  one 
clerk  for  each  book;  but  for  the  larger  banks  there  are 
many  subdivisions,  still  the  principle  is  the  same.  The 
grand  arrangement  is  that  these  '  in  '  and  '  out '  books 
are  exact  counterparts  of  one  another,  so  far  as  the 
ruHng  and  heading  are  concerned. 

"  Therefore  when  at  some  minutes  past  four  in  the  af- 
ternoon the  clearers  at  the  house  receive  the  *  outbooks,' 
they  are  immediately  handed  over  to  the  '  inmen,'  so  that 
each  man  has  the  *  outbook  '  corresponding  with  his  '  in- 
book.' 

"  Now  of  course  it  is  clear  to  all  our  readers  that  the 
'  in  '  work  of  any  bank  must  be  the  '  out '  work  of  the 
other  banks,  because  the  checks  to  be  collected  by  any 
bank  are  despatched  to  the  house  and  distributed,  when 
the  *  in '  clerks  of  the  several  banks  enter  the  various 
charges  in  their  *  inbooks,'  that  is  to  say,  they  enter  in 
their  '  inbooks  '  the  charges  they  have  to  pay.  The  clear- 
ing clerks  then  arrange  their  books  so  that  the  '  outbook  ' 
is  on  their  left  hand,  and  the  '  inbook  '  on  their  right — i.e., 
the  book  which  contains  the  articles  to  be  received  is  on 
their  left,  while  the  book  containing  the  articles  to  be  paid 
is  on  their  right.  The  *  sheet '  is  then  taken,  and  on  it  the 
clerk  next  bestows  all  his  attention.  A  specimen  of  this 
'  sheet '  on  which  the  balances  are  entered  is  as  follows : 


THE   LONDON    CLEARING-HOUSE  329 

Debtors.  The Bank.  Creditors. 

Alliance 

Barclay 

Barnett 

Bennett 

Bosanquet 

Brown 

Capital  and  Counties 

Central 

City 

Consolidated 

County 

Dimsdale 

Fuller 

Glyn 

Imperial 

Joint 

Bank 

London  and  Southwestern 

London  and  Westminster 

Martin 

Royal  Exchange 

National 

National  Provincial 

Prescott 

Robarts 

Southwark 

Smith 

Union 

Williams 

County  Clearing 

C.  H. 


"  This  form  is  in  reality  a  summary  of  the  day's  pro- 
ceedings, for  when  complete,  it  is  a  statement  of  the 
exact  position  which  each  individual  bank  bears  to  all 
and  each  of  the  clearing  banks. 

"  From  a  quarter  past  four  to  five  o'clock  there  is  the 
hurrying  of  the  clearers  from  one  desk  to  another,  shout- 
ing out  for  the  different  clerks,  calling  off  amounts,  cries  of 


UNIVERSITY  j 


330  CLEARING-HOUSES 

*  charge  you/  '  pay  you/  and  so  on,  apparently  a  perfect 
Babel.  The  noise,  which  seems  to  betoken  cessation  of 
work,  is  really  a  cloak,  as  it  were,  to  the  busiest  time  of 
the  whole  day,  for  a  settlement  must  be  made  of  all  the 
transactions,  and  the  clerks  are  agreeing  their  difiFerent 
totals  and  casts,  checking  amounts.  The  rapidity  with 
which  the  mental  calculations  are  made  is  simply  marvel- 
lous; the  clearers  run  up  column  after  column  of  figures 
with  their  eyes,  dotting  down  totals  as  they  go  on,  and 
with  the  majority  it  is  a  strange  exception  to  find  an 
error. 

"  Remember,  there  is  working  and  working — ^working 
in  a  bank  is  one  thing,  for  there  is  some  noise  and  dis- 
tracting influence;  but  working  in  the  clearing-house  is 
like  working  in  a  place  where  everything  tends  to  dis- 
tract and  deter  the  mind  from  action. 

"  With  a  man  on  this  side  and  another  on  that,  both 
shouting  out  different  questions  to  him  at  the  same  mo- 
ment, with  a  clerk  from  *  Glyn*s  '  yelling  out  for  the  cast 
of '  his  side,*  with  the  *  Union  '  man  calling  at  the  top  of 
his  voice  to  know  whether  he  has  his  '  books  '  (out)  down 
yet,  with  the  '  Imperial '  man  asking  for  the  amount  of 
some  item  or  other,  the  clearer  has  to  remain  calm,  un- 
moved, and  withal  alive  in  every  faculty  to  the  situation, 
casting  as  if  he  were  in  solitude  and  alone,  undisturbed  by 
any,  going  on  in  his  own  way.  When  he  has  marked  or 
ticked  all  his  balances,  he  returns  to  his  desk  and  waits. 

"  In  the  meantime,  while  all  these  things  have  been  tak- 
ing place  at  the  House,  the  runner  has  delivered  his  drafts 
(which  he  took  from  the  '  inclearer's  '  box)  to  the  proper 
authorities  of  his  establishment,  by  whom  they  are  ex- 


THE   LONDON    CLEARING-HOUSE  331 

amined  as  speedily  as  possible.  All  those  cheques,  etc., 
which  the  bank  officials  cannot  pay,  are  despatched  forth- 
with back  to  the  House.  The  '  inclearer  '  at  once  enters 
them  on  the  '  debtor '  side  (left  hand  side)  of  his  sheet  at 
the  end  after  the  cast,  and  then  finally  casts  up  that  side. 
As  soon  as  entered,  the  '  returns '  are  distributed  just  in 
the  same  manner  as  are  the  charges  in  the  afternoon. 

"  As  the  clearer  sits  at  his  desk,  he  receives  the  returns 
sent  to  him  by  other  banks,  and  these  he  enters  on  the 
creditor  (right  hand)  side  of  the  sheet.  At  five  minutes 
past  five  the  bell  once  again  strikes,  the  clerk  runs  up  his 
sheet,  casting  it  finally,  and  strikes  the  balance,  which,  if 
it  be  a  debit  one  (say  £15,009,  is.  6d.)  he  enters  on  a  little 
form  printed  in  red,  thus : 


Drs.  Messrs 

To  General  Balance. 

;^i 5.009  IS.  6d. 

"  If,  on  the  other  hand,  he  has  to  receive,  say  £29,347, 
2s.  6d.,  he  uses  a  similar  form  printed  in  black : 


Crs.  Messrs.       .      . .       

To  General  Balances. 

£2g,347  2s.  6d. 

332  CLEARING-HOUSES 

''  Having  filled  up  this  little  form,  he  next  proceeds  to 
write  his  ticket,  which  will  be  a  '  green,'  if  he  is  to  receive 
on  account  of  the  day's  transactions,  a  *  white  '  if  he  has 
to  pay.    The  green  ticket  runs  as  follows : 


SETTLEMENT   AT   THE    CLEARING-HOUSE. 

London, l88 

To  the  Cashier  of  the  Bank  of  England. 

Be  pleased  to  Credit  our  Account  the  sum  of , 

out  of  the  money  at  the  credit  of  the  account  of  the  Clearing  Bankers. 

£ 

Seen  by  me 

Inspector  of  the  Clearing-House. 


"  This  is  the  left  hand  half  of  the  ticket;  the  right  hand 
is  somewhat  different,  thus : 


SETTLEMENT   AT   THE   CLEARING-HOUSE. 

Bank  of  England.  i88 

To  Account  of  Messrs 

has  this  evening  been  Credited  with  the  sum  of , 


out  of  the  money  at  the  credit  of  the  account  of  the  Clearing  Bankers. 
For  the  Bank  of  England, 

£ 


"  If  it  happens  that  the  clearer  has  to  pay  on  account  of 
his  bank,  he  then  fills  up  a  white  form,  the  left  and  right 
hand  halves  of  which  are  as  follows : 


THE   LONDON    CLEARING-HOUSE  333 


(Left  Hand) 
SETTLEMENT   AT    THE  CLEARING-HOUSE. 

London, 1 88 

To  the  Cashier  of  the  Bank  of  England. 

Be  pleased  to  Transfer  from  our  Account  the  sum  of 


and  place  it  to  the  credit  of  the  Account  of  the  Clearing  Bankers, 
and  allow  it  to  be  drawn  for  by  any  of  them  (with  the  knowledge  of 
either  of  the  Inspectors,  signified  by  his  countersigning  the  drafts). 

L 


(Right  Hand) 
SETTLEMENT   AT    THE   CLEARING-HOUSE. 

Bank  of  England.  ^^8 

A  Transfer  for  the  sum  of 

has  this  evening  been  made  at  the  Bank,  from  the  Account  of 

Messrs 

to  the  account  of  the  Clearing  Bankers. 

£ For  the  Bank  of  England. 

This  certificate  has  been  seen  by  me ; 

Inspector. 


"  When  the  ticket  is  '  white/  the  clearer  fills  it  up  with 
the  other  form,  leaves  the  little  form  with  his  sheet  on  the 
Inspector's  desk,  and  then  hurries  over  to  the  Bank  of 
England  with  his  ticket.  The  cashier  at  the  bank,  seeing 
that  the  ticket  presented  to  him  is  signed  by  the  manager, 
or  other  persons  duly  authorized,  of  whatever  bank  the 
clerk  may  purport  to  come  from,  signs  the  counterfoil, 
and  retains  the  half,  authorizing  him  to  transfer  a  certain 


334  CLEARING-HOUSES 

amount  from  the  account  of  that  bank  to  the  account 
of  the  clearing  bankers.  The  clearer  on  receiving  the 
other  half,  signed  by  the  cashier  of  the  Bank  of  Eng- 
land, returns  to  the  House  to  get  the  Inspector's  sig- 
nature to  the  transfer,  which  he  then  takes  to  his  own 
establishment.  If  the  clearer  be  going  to  receive,  he 
gets  the  Inspector's  signature  first,  then  goes  to  the 
Bank  of  England  as  before,  where  the  same  operation 
takes  place.  On  regaining  his  ticket,  or  rather  half  of 
his  ticket  from  the  cashier,  he  returns  to  his  own  bank." 


CHAPTER   XX 

JAPANESE   CLEARING-HOUSES 

Location — Date  of  Formation— Hours  of  Clearing — Average 
Daily  Clearings  and  Balances — Tokio  Clearing-house — 
Volume  of  Clearings  and  Growth  in  Ten  Years — Arrange- 
ment of  Clearing-room — Abstract  of  Rules  and  Regulations 
of  Tokio  Clearing-house. 

In  view  of  the  recent  ascendancy  of  Japan  among  the 
commercial  and  manufacturing  nations  of  the  world,  an 
account  of  the  clearing-houses  there  existing  is  of  interest 
to  bankers  and  business  men  everywhere.  The  following 
particulars  were  gathered  from  a  representative  of  the 
Japanese  Government,  who  visited  this  country  a  short 
time  since,  in  quest  of  information  concerning  the  con- 
duct of  American  financial  and  business  institutions : 

There  are  four  clearing-houses  in  Japan — namely,  the 
Osaka  Clearing-house,  which  dates  back  to  December 
1st  of  the  twelfth  year  of  Meiji  (1879);  the  Tokio  Clear- 
ing-house, which  was  established  December  ist  of  the 
twentieth  year  of  the  Meiji  (1887)  ;  the  Kobe  Clearing- 
house, which  was  established  July  i,  1897,  and  the  Kioto 
Clearing-house,  which  dates  from  December  15,  1897. 
The  Osaka  Clearing-house  Association  is  comprised 
of  twenty-two  members,  among  which  are  thirteen  head 
offices  and  nine  branches.     The  Tokio  Clearing-house 

335 


336  CLEARING-HOUSES 

Association  has  thirty-four  members,  embracing  eigh- 
teen head  offices  and  sixteen  branches.  The  Kobe 
Clearing-house  Association  has  ten  members,  of  which 
four  are  head  offices  and  six  are  branches.  The  Kioto 
Clearing-house  Association  has  twelve  members,  of 
which  seven  are  head  offices  and  five  are  branches. 

Clearings  in  all  of  these  are  made  once  a  day.  The 
Tokio  Clearing-house  opens  at  10.30  a.m.,  and  closes  at 
1 1  A.M.  The  Osaki  Clearing-house  opens  at  i  p.m.  and 
closes  at  1.30.  Similar  short  periods  of  time  are  observed 
by  the  clearing-houses  at  Kioto  and  Kobe. 

Bills  of  exchange,  promissory  notes,  certificates  of  de- 
posit, and  checks  are  regarded  as  good  clearing-matter 
and  are  allowed  to  pass  through  the  clearing-houses  as 
regular  exchanges.  The  average  daily  clearings  and  bal- 
ances in  the  four  clearing-houses  named  are  as  follows: 

Clearings,  Balances, 

in  Yens.  in  Yens. 

Osaka   560,000  120,000 

Tokio  2,600,000  920,000 

Kioto   210,000  54,000 

Kobe   260,000  74,000 

Balances  are  borrowed  and  loaned  on  interest  by  the 
bank  officials.  The  central  bank  (the  Bank  of  Japan) 
settles  the  balances  by  means  of  transfers  between  cur- 
rent accounts.  Each  bank  in  the  clearing-houses  has  an 
account  with  the  central  bank.  The  central  bank  is 
located  in  Tokio,  but  has  branches  in  various  cities. 

The  expenses  of  the  clearing-houses  are  met  as  fol- 
lows: One-half  of  the  total  expenses  is  borne  by  the 
banks  comprising  the  clearing-house  in  equal  shares. 


JAPANESE   CLEARING-HOUSES  337 

The  other  half  is  paid  by  the  banks  in  proportion  to  the 
amount  of  items  presented  by  them  at  the  clearing- 
house. 

Country  banks  are  not  allowed  to  clear  their  bills  and 
checks  through  the  clearing-houses,  but  banks  in  the 
cities  are  permitted  to  clear  their  bills  through  a  member 
of  the  clearing-house.  A  clearing-house  bank  clearing 
items  for  a  non-member  is  required  to  apprise  all  the 
members  of  the  clearing-house  of  this  fact. 

The  Tokio  Clearing-house,  as  before  mentioned,  dates 
back  to  1879.  ^^  the  beginning  the  association  was 
composed  of  twelve  banks.  The  business  methods  of 
the  clearing-house  at  that  time  were  so  imperfect  that  it 
was  finally  compelled  to  discontinue  business.  This  oc- 
curred after  an  existence  of  about  three  years.  There 
then  followed  a  careful  investigation  of  the  various  sys- 
tems employed  in  different  parts  of  the  world,  which  re- 
sulted in  the  formation  of  a  new  clearing-house  in 
February,  1891.  The  new  clearing-house  was  organized 
under  the  name  of  the  Tokio  Clearing-house  and  it 
commenced  business  in  March  of  that  year.  It  was 
modelled  upon  the  lines  of  the  London  Clearing-house. 
The  special  features  adopted  are  indicated  by  the  fol- 
lowing rules : 

(i)  The  settlement  of  the  daily  balances  will  be  ef- 
fected by  transfers  on  the  books  of  the  Bank  of  Japan. 

(2)  The  Bank  of  Japan  will  clear  its  notes  and  checks 
as  a  special  member. 

(3)  Items  received  by  clearing-house  banks  are  to  be 
passed  through  the  clearing-house.  Direct  exchange 
between  members  of  the  clearing-house  will  not  be  al- 


338  CLEARING-HOUSES 

lowed.  For  the  violation  of  this  rule,  an  appropriate 
penalty  is  provided. 

(4)  Each  member  shall  deposit  as  security  with  the 
clearing-house  five  per  cent,  government  bonds,  to  the 
amount  of  ten  thousand  yens,  face  value. 

The  members  of  the  Tokio  Clearing-house,  at  the  time 
of  its  organization,  were  as  follows :  The  First  National 
Bank,  the  Third  National  Bank,  the  Fifteenth  Nation- 
al Bank,  the  Twentieth  National  Bank,  the  Twenty- 
seventh  National  Bank,  the  One  Hundred  and  Nine- 
teenth National  Bank,  the  Mitsui  Bank,  the  Yasuda 
Bank,  Branch  of  the  Thirteenth  National  Bank,  Branch 
of  the  Thirty-second  National  Bank,  and  one  other.  In 
addition  to  this  number,  there  was  the  Bank  of  Japan, 
which  is  a  special  member.  In  January,  1895,  the  Kawa- 
saki Bank  and  the  Imperial  Commercial  Bank  were  ad- 
mitted to  membership.  In  February  of  1896,  five  ad- 
ditional banks  joined  the  association — namely,  the  Tokai 
Bank,  the  Forty-first  National  Bank,  the  Seventy- 
seventh  National  Bank,  the  Seventy-eighth  National 
Bank,  and  the  One  Hundred  and  Thirteenth  National 
Bank.  Since  May,  1896,  the  Tokio  Clearing-house  has 
occupied  a  room  in  the  new  building  erected  by  the 
Bank  of  Japan. 

The  growth  of  the  clearing-house  business  in  Japan  is 
shown  by  the  following  table,  which  gives  in  the  first 
column  the  number  of  items,  and  in  the  second  their 
amount  for  each  year,  from  1887  to  October,  1897,  in- 
clusive : 


JAPANESE   CLEARING-HOUSES  339 

Number  of  Amount, 

Year.  Items.  in  Yens. 

1887 " 1,984  1,232,185 

1888 25,289  12,281,948 

1889 36,524  19,559,400 

1890 42,301  20,206,094 

1891 59,427  67,595,422 

1892 97,190  113,576,594 

1893 134,505  148,018,871 

1894 172,189  185,597,497 

1895 223,123  289,102,424 

1896 349,429  417,425,507 

1897  (to  October) 440,464,548 

The  arrangement  of  the  banks  in  the  clearing-room  of 
the  clearing-house  is  as  follows:  The  desks  are  in  two 
parallel  rows,  at  some  little  distance  apart.  Between 
them,  at  one  end  and  projecting  outwardly,  somewhat 
beyond  the  ends  of  the  rows,  are  the  desks  of  the  man- 
ager and  secretary,  respectively.  The  first  desk  at  the 
right  of  the  manager  is  the  Bank  of  Japan.  Following  in 
order  down  this  row  are  the  First  National  Bank,  the 
Third  National  Bank,  the  Fifteenth  National  Bank,  the 
Twentieth  National  Bank,  the  Twenty-seventh  National 
Bank,  the  One  Hundredth  National  Bank,  the  One  Hun- 
dred and  Nineteenth  National  Bank,  and  the  One  Hun- 
dred and  Thirteenth  National  Bank.  The  row  at  the  left 
of  the  manager  has  banks  in  the  following  order :  Mitsui, 
Yesuda,  Konoike,  Thirty-second  National  Bank,  Im- 
perial Commercial  Bank,  Kawanaki,  Tokai,  Forty-first 
National  Bank,  Seventy-seventh  National  Bank,  and 
Seventy-eighth  National  Bank.  This  list  includes  only 
those  banks  which  have  been  previously  designated  in 
this  description  as  head  offices. 


340  CLEARING-HOUSES 

The  following  abstract  of  the  rules  and  regulations  of 
the  Tokio  Clearing-house  will  give  a  general  idea  of  the 
organization  and  conduct  of  this  institution.  The  other 
Japanese  clearing-houses  are  largely  modelled  upon  the 
same  plan,  and,  of  course,  are  subject  to  the  same  general 
laws: 

This  clearing-house  shall  be  named  the  Tokio  Clear- 
ing-house, and  it  shall  be  located  within  the  precincts  of 
the  Bank  of  Japan,  Honriokae  Cho  (street),  Niphon- 
bashi  Ku  (district).  The  object  of  this  clearing-house  is 
to  exchange  bills  and  checks  of  various  descriptions,  re- 
ceived by  member-banks. 

Claims  arising  from  the  non-payment  of  bills  and 
checks,  or  from  the  mistakes  of  clearing,  shall  be  settled 
between  the  banks  concerned,  and  the  clearing-house 
shall  not  be  responsible  therefor. 

The  rules  for  clearing  are  as  follows:  The  clearing- 
house will  open  at  10.30  a.m.  and  close  at  11  a.m.  ex- 
actly. These  hours  are  subject  to  change  by  the  board. 
Only  those  bills  and  notes  payable  at  member-banks  can 
be  cleared.  Daily  balances  shall  be  settled  by  means  of 
transfers  in  the  current  accounts  of  the  various  banks  in 
the  Bank  of  Japan.  The  settling  clerk  of  each  clearing- 
bank  must  list  bills  and  checks,  and  endorse  each  of 
them.  The  settling  clerk  shall  also  prepare  slips  and 
lists,  which  must  accompany  the  items  brought  to  the 
clearing-house. 

The  settling  clerk  of  each  bank,  after  the  exchanges 
are  made,  shall  fill  out  the  debtor  side  of  his  list,  strike 
a  balance,  and  prepare  a  balance  sheet,  which  he  shall 
submit  to  the  manager  of  the  clearing-house.    The  man- 


JAPANESE   CLEARING-HOUSES  341 

ager  of  the  clearing-house  shall  examine  the  balance 
sheets  submitted  by  the  settling  clerks,  and  it  shall  be  the 
duty  of  the  secretary  to  enter  all  items  in  a  book  kept  for 
that  purpose.  The  settling  clerks  of  the  debtor  banks 
shall  prepare  sheets  showing  the  balances  due  from  them, 
which  shall  be  signed  and  sent  to  the  Bank  of  Japan, 
which,  in  turn,  shall  give  advices  of  the  entry.  These 
advices  shall  be  sent  to  the  manager  of  the  clearing-house 
for  his  signature. 

Credit  banks  shall  also  make  up  slips  showing  the  bal- 
ances due  them,  which  slips,  after  being  signed  by  the 
settling  clerks,  shall  be  sent  to  the  manager  of  the  clear- 
ing-house for  his  signature,  after  which  they  shall  go  to 
the  Bank  of  Japan,  which  shall  give  advice  of  credit. 

The  manager  of  the  clearing-house  shall  make  up  his 
settlement  sheets  every  day,  after  clearing,  and  send 
them  to  the  Bank  of  Japan. 

When  bills  and  checks  sent  through  the  clearing- 
house are  dishonored,  they  shall  be  returned  through  the 
exchanges  of  the  next  day  to  the  banks  presenting  them, 
from  whom  they  shall  receive  the  cash  therefor.  Noti- 
fication of  dishonored  items  must  be  made  before  3 
o'clock  of  the  day  in  which  they  are  passed  through  the 
clearing-house. 

If  the  bank  which  presented  the  dishonored  bills  re- 
fuses to  take  them  up,  and  if  it  fails  to  send  the  requisite 
sum  of  the  Bank  of  Japan  before  1.30  p.m.,  the  credit 
bank  shall  advise  the  manager  of  the  clearing-house,  and 
thereupon  he  shall  call  upon  the  debtor  bank  to  make 
the  payment. 

If  the  debtor  bank  does  not  then  make  the  payment, 


342  CLEARING-HOUSES 

the  manager  of  the  clearing-house  will  make  new  settle^ 
ment  sheets  and  will  force  the  bank  to  send  back  all 
checks  and  bills  of  the  previous  day  for  return  to  the 
banks  presenting  them.  If  the  items  above  referred  to 
have  been  stamped  ''  Paid  "  or  ''  Entered,"  the  bank 
must  make  out  a  slip,  advising  that  they  were  not  paid. 
If  the  bank  does  not  fulfil  this  requirement,  the  man- 
ager of  the  clearing-house  will  then  establish  the  fact 
of  their  non-payment  by  means  of  his  books. 

The  following  regulations  concerning  clearing-banks 
are  in  force :  Only  banks  having  accounts  with  the  Bank 
of  Japan  are  eligible  to  membership.  The  Bank  of  Ja- 
pan, as  a  special  member,  shall  send  its  settling  clerk  to 
the  clearing-house.  Each  member  shall  deposit  as  se- 
curity, with  the  clearing-house.  Government  bonds  bear- 
ing interest  at  the  rate  of  five  per  cent,  or  more,  to  the 
amount  of  ten  thousand  yens,  face  value.  The  expenses 
of  the  clearing-house  shall  be  paid  by  its  members,  im- 
mediately after  receipt  of  advice  from  the  committee. 
Members  shall  not  without  reason  refuse  bills  and  checks 
payable  at  clearing-banks  in  the  course  of  their  busi- 
ness. Whether  a  clearing-bank  has  bills  or  checks  to 
bring  into  the  clearing-house  or  not,  it  must  send  its 
settling  clerk  to  the  clearing-house. 

Banks  desiring  to  become  members  of  the  clearing- 
house shall  apply  to  the  committee  of  the  clearing-house, 
through  an  introduction  of  a  clearing-bank.  The  com- 
mittee shall  give  notice  of  the  application  to  the  mem- 
bers, and  they  will  proceed  at  the  proper  time  to  ballot 
in  secret,  a  three-fourths  vote  being  required  to  admit  a 
new  member. 


JAPANESE   CLEARING-HOUSES  343 

Before  clearing  for  a  non-member  bank,  a  bank  must 
give  notice  to  the  committee,  which  shall  advise  all  the 
other  members.  The  clearing-bank  shall  not  be  respon- 
sible for  the  bills  of  the  bank  for  which  it  clears. 

Members  desiring  to  retire  from  the  clearing-house 
shall  apply  to  the  committee,  whose  duty  it  shall  be  to 
notify  all  the  members,  and  if  there  is  no  objection,  the 
application  shall  be  granted.  Until  its  resignation  is  ac- 
cepted, the  bank  shall  not  receive  its  security,  and  shall 
send  its  settling  clerk  to  the  clearing-house  as  usual. 

If  a  member  refuses  the  payment  in  accordance  with 
the  provisions  relating  to  dishonored  bills,  the  commit- 
tee shall  sell  its  security  and  settle  its  debts,  in  which 
case  the  committee  shall  expel  the  bank  and  advise  all 
the  members,  and  the  members  shall  not  receive  checks 
and  bills  payable  at  that  bank. 

When  a  member  violates  the  rules  of  the  clearing- 
house, or  is  deemed  insolvent,  or  in  danger  of  failing,  the 
committee  shall  make  an  investigation,  summoning  be- 
fore it  an  of^cer  of  the  bank.  A  special  meeting  of  all 
the  members  shall  be  called,  and  with  the  consent  of 
three-fourths  of  those  present,  the  bank  may  be  expelled 
from  the  clearing-house. 

The  following  are  the  regulations  concerning  meet- 
ings :  Meetings  are  of  two  kinds :  First,  regular  meet- 
ings; second,  special  meetings.  Regular  meetings  shall 
be  held  twice  a  year,  in  January  and  July,  at  which  meet- 
ings the  committee  shall  make  reports  of  the  general 
afifairs  of  the  clearing-house  and  of  the  expenditures  for 
the  preceding  six  months.  Special  meetings  shall  be 
held  when  the  committee  deems  it  necessary,  or  at  the 


344  CLEARING-HOUSES 

request  of  five  or  more  members.  The  chairman  of  the 
committee  shall  preside  at  the  meetings.  In  his  ab- 
sence, one  of  the  other  members  of  the  committee  shall 
take  his  place.  A  quorum  shall  consist  of  a  majority  of 
the  whole  number. 

All  questions,  except  those  relating  to  the  admission 
of  new  members,  the  expulsion  of  members,  and  amend- 
ments to  the  Constitution,  shall  be  decided  by  majority 
vote.  In  case  of  a  tie,  the  chairman  shall  have  the  de- 
ciding vote.  The  minutes  of  the  meeting  shall  be  kept 
and  signed  by  the  chairman. 

The  following  are  the  provisions  relating  to  the  clear- 
ing-house committee:  The  committee  shall  consist  of 
three  members  and  the  term  of  of^ce  shall  be  for  one 
year.  They  shall  be  chosen  from  the  managers  and  di- 
rectors of  the  clearing-banks  and  shall  have  the  power 
to  select  their  own  chairman.  They  shall  be  eligible  for 
re-election. 

The  duties  and  powers  of  the  committee  are  indicated 
in  the  following  summary :  (a)  General  business  of  the 
clearing-house;  (b)  Enforcement  of  the  rules  of  the  clear- 
ing-house; (c)  Control  of  the  manager;  (d)  Appointment, 
dismissal,  and  regulation  of  the  salary  of  the  manager, 
subject  to  the  approval  of  the  clearing-house  banks;  (e) 
Appointment  and  dismissal  and  regulation  of  the  salary 
of  the  secretary;  (f)  Arbitration  of  disputes  between 
members;  (g)  Calling  special  meetings.  Of  the  fore- 
going, a,  b,  and  c  can  be  attended  to  by  one  member; 
d,  e,  f,  and  g  require  a  two-thirds  vote  of  the  committee. 

The  following  are  the  regulations  affecting  the  man- 
ager and  secretary :    The  manager  shall  be  appointed  by 


JAPANESE   CLEARING-HOUSES  345 

the  committee,  subject  to  the  approval  of  the  meeting. 
The  manager  shall  be  controlled  by  the  committee  and 
shall  have  supervision  of  the  secretary's  work.  He  shall 
be  responsible  for  the  settlement  of  the  clearings  and  the 
settling  clerk  shall  be  under  his  control  and  must  obey 
his  commands  while  in  the  clearing-house.  The  secre- 
tary, under  supervision  of  the  committee  and  manager, 
shall  attend  to  the  general  affairs  of  the  clearing-house. 

The  following  rules  relate  to  expenditures:  The  re- 
port of  the  expenditures  of  the  clearing-house  shall  be 
presented  by  the  committee  twice  a  year,  at  the  regular 
meetings.  The  expenses  of  the  clearing-house  shall  be 
met  in  the  following  manner :  One-half  shall  be  borne  by 
all  the  members  equally;  the  other  half  shall  be  appor- 
tioned between  members,  according  to  the  amount  of 
items  presented  by  them  at  the  clearing-house.  To  pro- 
vide a  fund  to  meet  expenses,  members  are  required  to 
deposit  with  the  clearing-house  a  certain  sum  of  money, 
stipulated  by  the  committee. 

The  following  provision  with  respect  to  changes  of 
Constitution  and  By-laws  is  made:  The  Constitution 
may  be  amended  by  a  three-fourths  vote,  at  a  meeting  of 
the  members  of  the  association,  but,  to  be  effective,  re- 
quires the  approval  of  the  Bank  of  Japan. 

The  following  rules  with  regard  to  penalties  are  in 
force:  Settling  clerks  who  are  late  shall  be  fined  thirty 
sens  (fifteen  cents).  If  a  settling  clerk  is  more  than  five 
minutes  late  he  will  be  fined  fifty  sens  (twenty-five 
cents),  and,  in  addition  to  this,  he  will  not  be  allowed  to 
deliver  his  bills  and  checks  to  the  other  banks,  but  he  will 
be  obliged  to  receive  those  that  are  brought  in  by  the 


346  CLEARING-HOUSES 

other  banks  to  him.  Members  shall  not  be  absent  with- 
out reason,  under  penalty  of  a  fine  of  two  yens  (one  dol- 
lar). If  absent,  the  bills  to  be  delivered  to  the  bank  can 
be  presented  direct  for  payment. 

If  a  settling  clerk  makes  a  mistake  in  his  balance-sheet, 
submitted  to  the  manager,  he  will  be  fined  twenty  sens, 
but  if  he  finds  his  mistake  five  minutes  before  the  closing 
of  the  settlement,  he  will  be  released  from  the  fine.  If 
he  cannot  find  his  mistake  after  the  closing  of  the  clear- 
ing, he  will  be  fined  twenty  sens  for  each  ten  minutes. 
If  there  is  a  mistake  in  the  slip,  the  clearing-house  will 
collect  thirty  sens  fine  from  the  presenter  of  the  sHp,  and 
the  provision  regulating  the  lines  of  settling  clerks  who 
make  a  mistake  in  their  balance-sheets  submitted  to  the 
manager  will  stand  void.  If  the  payment  of  dishonored 
bills  and  checks  is  deferred,  or  if  the  paying  in  of  the  bal- 
ance to  the  Bank  of  Japan  is  deferred,  two  yens  will  be 
collected  in  each  case. 


INDEX 

PAGE 

Action  in  cases  of  default,  Canadian  Clearing-houses 303 

Administration  in  Canada,  plan  of 33 

of  Chicago  Clearing-house   281 

of  Clearing-houses    28 

of   Clearing-house,    Philadelphia 222 

Admission  and  conduct  of  members.  New  York  Clearing-house  148 

Admission  fee,  Chicago  Clearing-house 279 

New   York   Clearing-house 148 

Admission  of  members,  St.  Louis  Clearing-house 286 

Admissions,  committee  on 31,  32 

New  York  Clearing-house,  committee  on 146 

to  membership,   Boston 243 

Adoption  of  constitution.  New  York  Clearing-house 134 

New  York  Clearing-house,  opposition  to 134 

Advantage  of  manager's  check 44 

Agency,  a  central,  the  Clearing-houses 24 

Agent,   Canadian   clearing 302 

Aggregate  of  issues  of  loan  certificates  at  New  York 106 

Agreement  as  to  rates  of  exchange,  Buffalo 14 

to  comply  with  rules  and  regulations  regarding  collections 

outside  of  New  York 172 

Amendment  to  Boston  Clearing-house  constitution 248 

Amount   of   exchanges   brought   to   the    New    York    Clearing- 
house, by  one  bank,  greatest 208 

Amount  of  exchanges  taken  from  New  York  Clearing-house,  by 

one  bank,  greatest   208 

Amount  of  payment,  New  Orleans,  resolution  limiting 114 

Amounts  paid  in  making  settlements,  tickets  used  by  Boston 

banks  for  notifying  manager  of 234 

Annual  meeting   33 

Chicago  Clearing-house   282 

Application  for  membership,  Chicago  Clearing-house 279 

in  Tokio  Clearing-house  342 

Philadelphia 222 

Application  to  clear  for  another  bank,   New   York  Clearing- 
house    154 

Application  to  New  Orleans  loan  committee  for  certificates.  ...   11 1 

Arbitration  committee   3^,  32 

New   York   Clearing-house 146 

Arithmometers,    foreign    department,    Boston    Clearing-house, 

Burrough's   258 

Arrangement  of  banks  in  Tokio  Clearing-house 339 

Arrangement  of  furniture 47 

347 


348  INDEX 

PAGE 

Assessment  for  expenses,  Boston 242 

Philadelphia  " 221 

St.  Louis  Clearing-house 289 

Assistance  of  members,  mutual 12 

Assistant    manager,    New    York    Clearing-house,    William    J. 

Gilpin,   present    144 

Assistant  manager's  rooms,  New  York  Clearing-house,  view  in 

manager's  and   143 

Associated  banks,  Boston,  statement  of 241 

New  York  Clearing-house,  form  of  statement  required  of. .   164 
of  the  city  of  New  York,  form  of  summary  of  weekly  state- 
ment of  the 163 

of  the  city  of  New  York,  skeleton  of  the  weekly  statement 

of  the  162 

Atlanta,  Ga.,  form  of  Clearing-house  loan  certificate  used  in. ..   119 

in  1893,  issue  of  loan  certificates  at 117 

loan  certificates,  special  features  of 117 

Attitude  of  banks  toward  loan  certificates 83 

Authorization  of  loan  certificates  by  Philadelphia  in  1873 91 

Average  condition,  Philadelphia,  statement  of 218 

Average  daily  clearings  and  balances,  Japanese  Clearing-houses  336 

weekly  return,   Boston 240 

Averages  of  Brooklyn  non-member  banks,  form  of  statement 

of  weekly  1 56 

Back  of  check  drawn  by  Woodward  Brothers,  fac-simile  of 75 

Balance    6 

Balance  from  one'  day's  exchanges,  New  York  Clearing-house, 

largest  208 

New  York  Clearing-house,  smallest 208 

Balance  paid  by  New  York  Clearing-house  to  one  bank,  largest  208 
smallest 208 

Balance    paid    to    New    York    Clearing-house    by    one    bank, 

smallest    208 

by  single  institution,  largest 208 

Balance,  receipt  for  ( Buffalo) 39,  40,  41 

slips  of  Tokio  credit  banks 341 

Balances,  average  rate  on,  at  St.  Joseph,  Mo 13 

Boston,  borrowing  and  loaning 233 

Boston,  circulating  notes  in  settlement  of 229 

Boston,  settlement  of 232 

Canadian  Clearing-houses,  payment  of 314 

Chicago  Clearing-house,  settlement  of 268 

Chicago   Clearing-house,   trading. 270 

Clearing-house  certificates  in  liquidation  of.  New  York....  190 
form  of  settling  clerk's  report  to  his  bank  of  daily,  New 

York , 189 

Japanese  Clearing-houses,  average  daily  clearings  and 336 

Japanese  Clearing-houses,  borrowing  and  loaning 336 

Japanese  Clearing-houses,  settlement  of 336 

London,  form  for  entering  credit 331 

London,  form  for  entering  debit 331 

London,  sheet  for  entering 328 


INDEX  349 

PAGE 

Balances,  methods  of  settlement  of 36 

paid  in  money  for  forty-six  years,  table  showing,  New  York  205 

paid  September  30,  1899,  debit,  New  York 194 

payment  of  debit.  New  York 188 

rate  on  bank  at  Sioux  City,  la 13 

St.  Louis,  form  for  listing 293 

Tokio  Clearing-house,  settlement  of 340 

record  of  money  and  certificates  used  in  settlement  of  New 

York    194 

report  of,  New  York 184 

responsibility  of  association  for.  New  York 195 

settlement  of 25,  26,  2"; 

settlement  of  Clearing-house 35 

that  have  been  loaned,  Chicago  form  of  order  used  in  trans- 
ferring      273 

to  clearings,  ratio  of 36 

with  interest,  borrowing  and  loaning 42,  44 

without  interest,  borrowing  and  loaning 42,  44 

with  money,  settlements  of 37 

without  money,  settling 40 

Baltimore  clearing  regulations 51 

Baltimore,  form  of  Clearing-house  loan  certificates  used  in 107 

in  1873,  issue  of  loan  certificates  at 94 

in  1893,  issue  of  loan  certificates  at 108 

methods  of  delivery 54 

rates  of  exchange,   1897 .' 15 

Bank  examiners,  special  25 

Banking  and  currency  systems  of  the  Dominion  of  Canada 297 

Bank,    New    York    Clearing-house,    application    to    clear    for 

another    154 

New  York  Clearing-house,  consent  to  clear  for  another...   155 
New     York     Clearing-house,     resolution    authorizing    ex- 
changes through  a  member 153 

Bank  statements,  form  used  at  New  York  Clearing-house  in 

tabulating  national   160 

form  used  at  New  York  Clearing-house  in  tabulating  State.    161 
Banks  and  currency  of  the  several  United  States,  Albert  Gal- 
latin, suggestions  on 130 

Banks,  belonging  to  Canadian  Clearing-houses,  number  of 302 

Chicago   Clearing-house,   non-member 276 

foreign     department     Boston     Clearing-house,     resolution 

adopted  by  foreign 251 

form  of  statement  of  weekly  averages  of  Brooklyn  non- 
member   156 

in  Tokio  Clearing-house,  arrangement  of 339 

New  York  Clearing-house,  form  of  statement  required  of 

associated    164 . 

New  York  clearing-house,  skeleton  of  quarterly  statement 

of  national    165 

New  York  Clearing-house,  skeleton  of  weekly  statement  of 

non-member   167 

of  the  city  of  New  York,  form  of  summary  of  weekly  state- 
ment of  the  associated 163 


350  INDEX 

PAGE 

Banks,   of  the   city  of   New   York,    skeleton  of  the   quarterly 

statement  of  the  condition  of  the  State i66 

of  the  city  of  New  York,  skeleton  of  the  weekly  statement 

of  the  associated   162 

stationery  used  by  New  York 177 

toward  loan  certificates,  attitude  of ' 83 

Bill  5 

of  exchange 5 

Birmingham,  Ala.,  clearing  regulations 51 

form  of  Clearing-house  loan  certificates  used  in 121 

currency  system   1 18 

in  1893,  issue  of  loan  certificates  at 117 

Boards,  duties  of  Canadian  Clearing-house 301 

of  directors  of  New  Orleans  associated  banks,  resolution 
passed  by  1 1 1 

Book-keeping  employed  in  foreign  department,  Boston  Clear- 
ing-house     260 

Bond,  manager's 29 

Borrowing  and  loaning  balances,  Boston 233 

J  apanese  Clearing-houses  336 

with  interest  42,  44 

without  interest 42,  44 

Boston  association,  meetings  of 244 

Boston  Clearing-house   228 

book-keeping  employed  in  foreign  department 260 

constitution,  amendment  to  248 

exchange  ticket,  foreign  department 253 

fines,  foreign  department 254 

foreign  department   22,  246 

foreign  slip  and  foreign  check  ticket 255 

form  of  letter  of  transmission  to  correspondents,  foreign 

department   259 

form  of  settling  clerk's  statement,  foreign  department 261 

forms  used  by  foreign  department 256 

hours  for  clearing,  foreign  department 251 

ledger  employed  by  foreign  department 260 

letter-form   used   in   transmitting   checks,    foreign    depart- 
ment     258 

location  of  / 231 

organization  of  foreign  department  of 246 

receipt,  foreign  department 257 

regulations  for  collection  of  out-of-town   checks,  foreign 

department   251 

report  of  committee  on  foreign  department 246 

resolution  adopted  by  collecting  banks,  foreign  department  251 

rules  and  regulations  governing  foreign  department 248 

settling  clerk's  statement,  foreign  department 258 

Boston,  form  of  Clearing-house  loan  certificate  used  in 105 

in  1873,  issue  of  loan  certificates  by Qi 

in  1893,  issue  of  loan  certificates  at 106 

in  1895,  issue  of  loan  certificates  at 122 

Brooklyn   non-member   banks,    form   of   statement   of   weekly 

averages  of  156 


INDEX  35, 

PAGE 

Buffalo  in  1893,  issue  of  loan  certificates  at 1 14 

Buffalo,  N.  Y.,  agreement  on  rates  of  exchange 14 

Building  company,  New  York  Clearing-house 137 

Building  fund,  New  York  Clearing-house 136 

Burrough's  arithmometers,  foreign  department,  Boston  Clear- 
ing-house    258 

By-laws,  Tokio  Clearing-house,  provision  respecting  changes 

of  constitution  and 344 

Calculating  interest  on  certificates,  methods  of 123 

Camp,  second  manager  New  York  Clearing-house,  William  A.   142 

Canada,  banking  and  currency  systems  of  the  Dominion  of 297 

Clearing-houses  in   299 

plan  of  administration  in 33 

Canadian  clearing  agent 302 

Canadian  Clearing-house  boards,  duties  of 301 

managers'   duties    302 

Canadian   Clearing-houses 297 

action  in  cases  of  default 303 

clearing  of  non-members  304 

clearing  matter    317 

defaulting  members  316 

expulsion  of  members 303 

government  of  301 

medium  of  settlement 316 

number  of  banks  belonging  to 302 

objects  of   300 

payment  of  balances 314 

routine  of  exchanges 304 

statements   of   condition 318 

single  instance  of  failure 303 

withdrawals  of  members 303 

Canadian  settlements    yj 

Carrying  checks  to  Clearing-house,  method  of 53 

Cashier  of  Clearing-house,  Fall  River,  Mass 57 

Cashiers  of  New  Orleans  associated  banks,  communication  ad- 
dressed to    1 10 

Cash  settlement  of  balances 26,  27 

settlements,  Chicago  Clearing-house 272 

Centre,  money 6 

Cedar  street,  New  York  Clearing-house,  view  down 141 

property,   purchase  of 138 

Central  agency,  the  Clearing-houses  a 24 

Certificate  of  deposit  used  by  Richmond,  Va.,  associated  banks     43 
Certificate  used  by  New   York   Clearing-house   in    1873,   form 

of  loan   89 

used  in  Philadelphia,  form  of  Clearing-house  loan 93 

Certificates,  at  Baltimore  in  1873,  issue  of  loan 94 

at  Birmingham  in  1893.  issue  of  loan 117 

at  Louisville,  Ky.,  in  1891,  issue  of  loan 102 

at  New  Orleans  in  1879,  issue  of  loan 97 

at  New  York  in  1884,  issue  of  loan 97 

at  New  York  in  1893,  issue  of  loan 104 

at  Philadelphia  in  1890,  issue  of  loan 102 


352  INDEX 

PAGE 

Certificates,  at  Pittsburg  in  1893,  issue  of  loan 1 16 

at  St.  Louis  in  1873,  issue  of  loan 95 

attitude  of  banks  toward  loan 83 

Boston,  loan 231 

by  Boston  in  1873,  issue  of  loan .........!. .....  91 

Certificates  by  New  York  association,  first  issue  of  loan '.  90 

second  issue  of  loan 90 

Certificates  by  Philadelphia  in  1873,  authorization  of  loan ..  91 

Certificates,  Chicago,  Clearing-house  loan 280 

Clearing-house,  banks  of  the  South. , .  120 

Clearing-house  loan  42,  45,  79 

J°^"  •/•••• v; '-42'  44 

denominations  of  loan  82 

description  of  Clearing-house  loan 79,  80 

first  issue  of  Clearing-house  loan 84 

fourth  issue  of  Clearing-house  loan 88 

in  liquidation  of  balances,  Clearing-house,  New  York 190 

interest  rates  on  loan 82 

in  1873,  issue  of  loan 88 

in  1890,  issue  of  loan 99 

issued  in  1890,  provision  for  retirement  of  loan 99 

issue  of  Clearing-house  loan 22 

legal  tender  42,  45 

origin  of  Clearing-house  loan 80 

resolution  adopted  by  New  York  association  in  1890  with 

regard  to 98 

resolution  passed  at  Philadelphia  in  1890  with  regard  to loi 

retirement  of  loan 82 

second  issue  of  clearing-house  loan 87 

St.  Louis  Clearing-house,  loan 285 

St.  Louis,  manager's 292 

third  issue  of  Clearing-house  loan 87 

value  of  Clearing-house  loan 81 

Charges,  collection,  St.  Louis,  Mo.,  system  of 17 

Denver,  Col.,  collection 19 

Rochester,  N.  Y.,  schedule  of  collection 15 

St.  Louis,  Mo.,  system  of  collection 17 

Toledo,  O.,  rate  of 16 

Charges  on  collections,  St.  Joseph,  Mo 20 

West  Superior,  Wis 19 

Chattanooga,  Tenn.,  in  1893,  issue  of  loan  certificates  at 120 

Check   6 

advantages  of  manager's 44 

Check  drawn  by  Woodward  Brothers,  fac-simile  of  back  of 75 

journey  of  74 

Check,  journey  of  a  country 68 

local    9 

personal    9 

the  journey  of  which  is  shown  on  map,  fac-simile  of 73 

ticket,  Boston  Clearing-house,  foreign  slip  and  foreign 255 

Check's  itinerary,  map  showing 77 

Checks  and  drafts,  extensive  use  of 62 

Checks,  Chicago  Clearing-house,  exchange  of 268 


INDEX 


353 


PAGE 

Checks,  clearing  country 62 

country    24 

foreign    department     Boston     Clearing-house,     letter-form 

used  in  transmitting 258 

foreign  department  Boston  Clearing-house,  regulations  for 

collection   of  out-of-town 251 

liability  for  manager's 42 

manager's 42 

method  of  carrying  to  Clearing-house 53 

method  of  collecting  country 68 

objection  to  country 64 

remedy  for  country 64 

Chester,  Pa.,  clearing  regulations 51 

Chicago,  description  of  clearing-room 265 

form  of  order  used  in  transferring  balances  that  have  been 

loaned    273 

forms  of  reports  used  in  trading  balances 271 

Chicago  Clearing-house,  administration  of 281 

admission  fee   279 

annual   meeting    282 

application  for  membership 279 

cash   settlements    272 

date  of  formation  of 263 

exchange  of  checks 268 

expenses  of  278 

expulsion  of  members  280 

failure  of  members  of 264 

fines  enforced  by 278 

hours  of  exchanges 265 

incorporation   of 264 

kinds  of  money  employed  in  settling  balances 268 

loan  certificates   280 

loans  to  members   280 

location  of  265 

Chicago  Clearing-house  manager  for  balance  due,  form  of  or- 
der on  275 

order  on  274 

Chicago  Clearing-house,  method  of  settlement 268 

non-member  banks   276 

original  membership  of 263 

present  membership  of 263 

records  of  exchanges 281 

requirements  for  membership  in 264 

restricted  endorsements    278 

restrictions  of  membership 279 

routine  of  exchange 266 

settlements  of  amounts  of  orders 274 

settlement  of  balances  268 

statement  of  condition  of  members 2TJ 

the    263 

trading  balances   270 

volume  of  clearings 280 

withdrawals  of  members 279 


354  INDEX 

PAGE 

Cincinnati  association  with  regard  to  loan  certificates,  resolu- 
tion adopted  by  95,  96 

Cincinnati,  fines  for  errors 57 

form  of  Clearing-house  loan  certificate  used  in. 113 

in  1893,  issue  of  loan  certificates  at 114 

method  of  delivery  54 

Cincinnati  clearing  regulations 51 

Circulating  notes  in  settlement  of  balances,  Boston 229 

Claims,  Tokio  Clearing-house,  settlement  of 340 

Classes  of  Clearing-houses  2 

Clear,  to  4 

Clearance   4 

Clearances   5 

Clear  for  another  bank.   New   York  Clearing-house,   applica- 
tion to   154 

New  York  Clearing-house,  consent  to 155 

Clearing   , 4 

agent,  Canadian   302 

at  Fall  River,  Mass 58 

at  New  Bedford,  Mass 58 

banks,  rules  concerning  Tokio 342 

country  checks 62 

foreign  department,  Boston  Clearing-house,  hours  for 251 

Clearing  for  non-members,  Japanese  Clearing-houses ^yj 

New   York  Clearing-house 150 

Tokio  Clearing-house   343 

Clearing  for  out-of-town  correspondents,  Fargo,  S.  Dak 51 

for  outside  banks  and  trust  companies,  Boston 238 

for  outside  institutions,  St.   Louis  Clearing-house,  liability 

of  members   287 

Clearing-house,  administration  of  Chicago 281 

admission  fee,  Chicago 279 

annual  meeting,  Chicago 282 

application  for  membership  in  Tokio 342 

application  for  membership,  Chicago 279 

arrangement  of  banks  in  Tokio 339 

association  of  the  banks  of  Philadelphia,  The 209 

Clearing-house  association,   Kioto 336 

Kobe 336 

Osaka    335 

Sedalia,  Mo 65 

Tokio  335 

Clearing-house  balances,  settlement  of 35 

Clearing-house,  banks  eligible  to  membership  in  Tokio 342 

boards,  duties  of  Canadian 301 

building  company.  New  York 137 

business,  illustration  of  growth  of  Japanese 339 

building  fund.  New  York 136 

book-keeping  employed  in  foreign  department,  Boston....  260 

Boston 228 

Canadian   297 

cash  settlements,  Chicago 272 

certificates,  banks  of  the  southeast 120 


INDEX 


355 


PAGE 

Clearing-house,  certificates,  fine  for  transfer  of.  New  York 190 

certificates  in  liquidation  of  balances,  New  York 190 

certificates.  New  Orleans,  ratification  of  issue  of 112 

clearing  matter,  Tokio 340 

clearing-room  of  New  York 49 

clearing  for  non-members,  Tokio 343 

committee    30,  31 

committee,  deposit  of  collateral  with  Philadelphia 219 

committee,  duties  and  powers  of  Tokio 344 

committee,  New  York  clearing-house 144 

committee,  provisions  relating  to  Tokio 344 

constitution,  amendment  to  Boston 248 

daily  routine  of  the  New  York 175 

date  of  formation  of  Chicago 263 

defects  of  original  system.  New  York 129 

defined    4 

definition  of  i 

dishonored  items,   Tokio 341 

due  bill,  Philadelphia 213 

duties  of  settling  clerk,  Tokio 340 

exchange  of  checks,   Chicago 268 

exchanges   47 

exchange  ticket,  foreign  department  Boston 253 

expenses  of  Chicago 278 

expenses  of  Tokio 342 

expulsion  of  members,  Chicago 280 

members,  expulsion  of  Tokio 343 

fac-simile  of  first  delivery  voucher,  Toronto 307 

failure  of  members  of  Chicago 264 

Fall  River,  Mass.,  cashier  of 57 

fines  enforced  by  Chicago 278 

fines,  foreign  department,  Boston 254 

foreign  department,  Boston 246 

foreign  slip  and  foreign  check  ticket,  Boston 255 

form  of  delivery  statement,  Toronto 305 

form  of  letter  of  transmission  to  correspondents,  foreign 

department,   Boston   259 

form  of  proof  used  in  Toronto 311 

form    of    settling    clerk's    statement,    foreign    department, 

Boston   261 

forms  used  by  foreign  department,  Boston 256 

gold  depository,  New  York 194 

hours  for  clearing,  foreign  department,  Boston 251 

hours  of  clearing,  Tokio 340 

hours  of  exchanges,   Chicago - 265 

incorporation  of  Chicago  264 

kinds  of  meetings,  Tokio 343 

kinds  of  money  employed  in  settling  balances,  Chicago 268 

ledger  employed  by  foreign  department,  Boston 260 

letter-form  used  in  transmitting  checks,  foreign  department, 

Boston 258 

location  of  47 

location  of  Boston 231 


356  INDEX 

PAGE 

Clearing-house,  location  of  Chicago 265 

Clearing-house  loan  certificates 42,  45,  70 

Chicago    280 

definition  of  80 

description  of  79 

first  issue  of 84 

fourth  issue  of 88 

issue  of  22 

origin  of  80 

second  issue  of 87 

third  issue  of 87 

used  by  New  York  Clearing-house  in  1873,  form  of 89 

used  in  Atlanta,  Ga.,  form  of 119 

used  in  Baltimore,  form  of 107 

used  in  Birmingham,  Ala.,  form  of 121 

used  in  Boston,  form  of 105 

used  in  Cincinnati,  form  of 113 

used  in  Detroit,  form  of 115 

used  in  New  Orleans,  form  of 109 

used  in  Philadelphia,  form  of 93 

value  of  81 

Clearing-house,  loans  to  members,  Chicago 280 

London    321 

Clearing-house  manager  for  balance  due,  order  on  Chicago. .. .  274 

form  of  order  on  Chicago 275 

Clearing-house  managers'  duties,  Canadian 302 

Clearing-house,  manager's  settlement  sheets,  Tokio 341 

members'  deposit  with  Tokio 342 

members  of  Tokio 338 

method  of  settlement,  Chicago 268 

national    65 

New  York   127 

non-member  banks,  Chicago 276 

object  of  Tokio 340 

officers  of  a 28 

organization  of  foreign  department  of  Boston 246 

original  location  of  New  York 134 

original  membership  of  Chicago 263 

origin  of  New  York 127 

Philadelphia,  administration  of   222 

present  membership  of  Chicago 263 

primary  object  of  a 11 

provision  respecting  changes  of  constitution  and  by-laws, 

Tokio  345 

receipt,  foreign  department,  Boston 257 

records  of  exchanges,  Chicago 281 

records  of  the  New  York I73 

refusal  to  pay  dishonored  bills,  Tokio 343 

regulations  for   collection  of  out-of-town    checks,   foreign 

department,   Boston   251 

reorganization  of  Tokio 337 

report  of  committee  on  foreign  department,  Boston 246 

requirements  for  membership  in  Chicago 264 


INDEX  -  c^,,,o^, 


PAGE 


Clearing-house  resolution  adopted  by  collecting  banks,  foreign 

department,  Boston 251 

restricted  endorsements,  Chicago   278 

restrictions  of  membership,  Chicago 279 

retirement  of  members,  Tokio 343 

routine  of  exchange,  Chicago  266 

rules  and  regulations  governing  foreign  department,  Boston  248 

rules  and  regulations  of  Tokio 340 

rules  for  clearing,  Tokio 340 

rules  of  Tokio ^^y 

rules  regarding  penalties,  Tokio 345 

rules  relating  to  expenditures,  Tokio 345 

rules  relating  to  manager  and  secretary,  Tokio 344 

St.   Louis 285 

St.  Louis,  operations  of 289 

second  location  of  New  York 135 

settlement  of  balances,  Chicago  268 

settlement  of  balances,  Tokio 340 

settlement  of  claims,  Tokio  340 

settlements  of  amounts  of  orders,  Chicago 274 

settling  clerk's  statement,  foreign  department,  Boston 258 

shares,  New  York 200 

special  functions  of  a 11 

statement  of  condition  of  members,  Chicago 277 

system,  possible  developments  of  the 23 

terms    3 

the  Chicago 263 

third  location  of  New  York 137 

trading  balances,  Chicago   270 

view  down  Cedar  street,  New  York 141 

view  of  New  York 139 

volume  of  clearings,  Chicago 280 

withdrawals  of  members,  Chicago 279 

Clearing-houses,  action  in  cases  of  default,  Canadian 303 

administration  of 28 

average  daily  balances  and  clearings,  Japanese 336 

borrowing  and  loaning  balances,  Japanese 336 

classes  of  2 

clearing  of  non-members,  Canadian 304 

clearing  for  non-members,  Japanese 337 

clearing  matter,  Canadian    3^7 

clearing  matter,  Japanese  33^ 

credit  voucher,  Toronto   308 

debit  vouchers,  Toronto  3io>  3ii 

defaulting  members,  Canadian   316 

examination  of  items,  Canadian 310 

expenses  of  Japanese 33^ 

expulsion  of  members,  Canadian 303 

fac-simile  of  second  delivery  voucher,  Toronto 309 

functions  of  i 

government  of  Canadian    30i 

hours  of  clearing,  Japanese  33o 

in  Canada ^99 


358  INDEX 


PAGE 


Clearing-houses,  Japanese   335 

location  of  Japane-se 335 

number  of  banks  belonging  to  Canadian 302 

number  of  clearings,  Japanese 336 

number  of  Japanese  335 

objects  of  Canadian  300 

payment  of  balances,  Canadian 314 

routine  of  exchanges,  Canadian 304 

manager's  settling  sheet,  Toronto 306 

medium  of  settlement,  Canadian 316 

second  delivery  voucher,  Toronto 306 

settlement  of  balances,  Japanese 336 

single  instance  of  failure,  Canadian 303 

statements  of  condition,  Canadian 318 

treatment  of  notes,  Canadian 317 

withdrawals  of  members,  Canadian 303 

Clearing,  Japanese  Clearing-houses,  hours  of 336 

Clearing  matter  8 

Canadian  Clearing-houses   317 

Japanese  Clearing-houses  336 

New  York   197 

rules  regulating  50 

Tokio  Clearing-house   340 

Clearing  of  non-members,  Canadian  Clearing-houses 304 

Clearing  regulations,  Baltimore,  Md 51 

Birmingham,  Ala 51 

Chester,  Pa 51 

Cincinnati,  0 51 

Dayton,  0 51 

Denver,  Colo 51 

Des  Moines,  la 51 

Fargo,  So.  Dak 51 

Holyoke,  Mass 51 

Los  Angeles,  Cal 51 

Lowell,  Mass 51 

New  Haven,  Conn 51 

New  Orleans,  La 52 

.    Rockford,  111 52 

St.  Paul,  Minn 52 

Savannah,  Ga 52 

Scranton,  Pa 52 

Springfield,  Mass 51 

Springfield,  O. 51 

Toledo,  0 51 

Topeka,  Kan 51 

Waco.  Tex 52 

Washington,  D.  C 52 

Worcester,   Mass 51 

Youngstown,  0 52 

Clearing-room,  Chicago,  description  of 265 

description  of ;  •  •  • : '75 

New  York  Clearing-house,  view  in 181 

of  New  York  Clearing-house 49 


INDEX 


359 


PAGE 

Clearing-room,  St.  Louis  Clearing-house 289 

Clearing  system  for  Long  Island  banks 66 

Clearing,  Tokio  Clearing-house,  hours  of 340 

Clearings    4 

a  day,  two 57 

and  balances,  Japanese  Clearing-houses,  average  daily 336 

Chicago  Clearing-house,  volume  of 280 

for  forty-six  years,  table  showing  New  York 203 

Japanese  Clearing-houses,  number  of 336 

ratio  of  balances  to  clearings 36 

St.  Louis  Clearing-house,  manager's  report  of 295 

St.  Louis  Clearing-house,  proper  matter  for 294 

Clerk,  delivery.  New  York 176 

settling.  New  York 176 

Clerks,  messengers  and  settling 53 

roll  call  of  West  Superior,  Wis 54 

Coin  certificates   42,  44 

Collateral    with    Philadelphia    Clearing-house    committee,    de- 
posit of  219 

Collect,  to 7 

Collecting  banks,  foreign  department,   Boston  Clearing-house, 

resolution  adopted  by   251 

Collecting  country  checks,  method  of ; 68 

Collecting  out-of-town  items,  New  York 22 

Collection  charges,  Denver,  Colo 19 

Rochester,  N.  Y.,  schedule  of 15 

St.  Louis,  Mo.,  system  of 17 

Collection  of  out-of-town  checks,  foreign  department,  Boston 

Clearing-house,  regulations  for  251 

Collection,  Topeka,  Kan.,  rates  of 17 

Collections 7 

at  Detroit,  method  of  handling 59 

New  York  Clearing-house,  rules  and  regulations  regard- 
ing outside 168 

outside  of  New  York,  agreement  to  comply  with  rules  and 

regulations   regarding 172 

outside  the  city  of  New  York 168 

St.  Joseph,  Mo.,  charges  on 20 

West  Superior,  Wis.,  charges  on 19 

Colored  slips,  Cincinnati   55 

Committee,  arbitration  31,  32 

Clearing-house   30,  31 

conference    ; 31 

duties  and  powers  of  Tokio  Clearing-house 344 

duty  of  loan   82 

exchange 3i»  32 

loan    ,••••; 3i  , 

New  York  Clearing-house,  arbitration 146 

New  York  Clearing-house,  Clearing-house 144 

New  York  Clearing-house,  conference 145 

New  York  Clearing-house,  nominating 146 

nominating  3i»  32 

Committee  on  admissions 3i>  32 


36o  INDEX 

PAGE 

Committee  on  admissions,  New  York  Clearing-house 146 

Committee  on  foreign  department,  Boston  Clearing-house,  re- 
port of   246 

Committee,  provisions  relating  to  Tokio  Clearing-house 344 

Committees,  Boston,  election  of  officers  and 244 

loan    81 

of  New  York  Clearing-house 144 

St.  Louis  Clearing-house,  duties  of  officers  and 288 

Communication  addressed  to  cashiers  of  New  Orleans  associ- 
ated banks  no 

Comparison  of  Philadelphia  weekly  statement  with  Boston  and 

New  York  statements  216 

Condition,  Canadian  Clearing-houses,  statements  of 318 

of  members,  Chicago  Clearing-house,  statement  of 277 

of  the  State  banks  of  the  city  of  New  York,  skeleton  of  the 

quarterly  statement  of  the 166 

St.  Louis  Clearing-house,  statement  of 288 

Conduct  of  members,  New  York  Clearing-house,  admission  and  148 

Conducting  the  exchanges,  method  of 54 

Conference  committee  31 

New  York  Clearing-house  145 

Consent  to  clear  for  another  bank.  New  York  Clearing-house. .  155 

Constitution,  amendment  to  Boston  Clearing-house 248 

and  by-laws,   Tokio   Clearing-house,   provision   respecting 

changes  of  345 

drafted  by  George  Curtis,  New  York  Clearing-house 134 

New  York  Clearing-house,  adoption  of 134 

New  York  Clearing-house,  opposition  to  adoption  of 134 

New  York  Clearing-house,  provisions  of 140 

Correspondents,  Fargo,  So.  Dak.,  clearing  for  out-of-town 51 

foreign  department,  Boston  Clearing-house,  form  of  letter 

of  transmission  to  259 

Country  check,  journey  of  a 68 

Country  checks   24 

clearing 62 

method  of  collecting  68 

objection  to 64 

remedy  for 64 

Courts  regarding  loan  certificates,  decision  of  Pennsylvania. . . .  126 

Credit  balances,  London,  form  for  entering 331 

Credit  banks,  balance  slips  of  Tokio 341 

Credit  ticket,  form  of  first  or  credit,  New  York 178 

Credit  voucher,  Toronto  Clearing-houses 308 

used  at  Toronto,  fac-simile  of 313 

Criticism  of  loan  certificates  125 

Currency  by  express,  shipping 24 

Currency,  depositories  for  27 

of  the  several  United  States,  Albert  Gallatin,  suggestions 

on  banks  and  130 

system,  Birmingham   118 

systems  of  the  Dominion  of  Canada,  banking  and 297 

Curtis,  George,  New  York  Clearing-house,  constitution  drafted 

by  134 


INDEX 


361 


PAGE 

Daily  balances,  form  of  settling  clerk's  report  to  his  bank  of, 

New  York  189 

Daily  clearings  and  balances,  Japanese  Clearing-houses,  average  336 

Daily  exchanges,  hour  of 48,  50 

Daily  routine  of  the  New  York  Clearing-house 175 

Daily  statement,  Philadelphia  217 

Date  of  formation  of  Chicago  Clearing-house 263 

Date  of  organization,  Boston 228 

of  Philadelphia  Clearing-house  association 209 

Day,  two  clearings  a 57 

Dayton,  O.,  clearing  regulations 51 

Debit  balances,  London,  form  for  entering 331 

paid  September  30,  1899,  New  York 194 

payment  of.   New  York 188 

Debit  list,  St.  Louis  Clearing-house,  fac-simile  of 291 

Debit  vouchers,  Toronto  Clearing-house 310 

Debit  voucher  used  at  Toronto,  fac-simile  of 315 

Decision  of  Pennsylvania  courts  regarding  loan  certificates 126 

Default,  Canadian  Clearing-houses,  action  in  cases  of 303 

Defaulting  members,  Canadian  Clearing-houses  316 

treatment  of.  New  York 194 

Defects  of  original  system.  New  York  Clearing-house 129 

Deficiencies  in  contents  of  sealed  bags  or  packages,  reclama- 
tions for  errors,  New  York 196 

Definition  of  a  Clearing-house i 

of  Clearing-house  loan  certificates 80 

Delivery  clerk,  New  York 176 

Delivery  clerk's  receipts,  form  of,  New  York 182 

New  York  I79 

Delivery  statement,  employed  at  Toronto,  form  of 305 

Toronto  Clearing-houses,  form  of 305 

Delivery  voucher,  Toronto  Clearing-houses,  fac-simile  oi  first.  307 

Toronto  Clearing-houses,  fac-simile  of  second 309 

Toronto  Clearing-houses,  second 306 

Delivering  items,  methods  of 55 

Denominations  of  loan  certificates 82 

Denver,  Colo.,  clearing  regulations 51 

collection  charges  IQ 

transfers  by  telegraph  ; 21 

Department  Boston  Clearing-house,  exchange  ticket,  foreign..  253 

foreign  246 

hours  for  clearing,  foreign ; 251 

regulations  for  collection  of  out-of-town  checks,  foreign..  251 

report  of  committee  on  foreign 246 

resolution  adopted  by  collecting  banks,  foreign 251 

rules  and  regulations  governing  foreign 248 

organization  of  foreign   246 

Deposit  certificate  used  by  Richmond,  Va.,  associated  banks. ..  43 
Deposit   of  collateral    with    Philadelphia    Clearing-house    com- 
mittee   ; 219 

Deposit  with  Tokio  Clearing-house,  members' 342 

Deposits,  fixing  uniform  rates  of  interest  on 13 

uniform  rates  of  interest  on 24 


362  INDEX 

PAGE 

Depositories  for  currency 27 

Depository,  Clearing-house  gold,  New  York 194 

gold 42,  45 

Description  of  Clearing-house  loan  certificates 79 

Description  of  Clearing-room,  Chicago 265 

Description  of  New  York  Clearing-room 175 

Des  Moines,  la.,  clearing  regulations 51 

Detroit,  form  of  Clearing-house  loan  certificates  used  in 115 

in  1893,  issue  of  loan  certificates  at 116 

method  of  handling  collections  at 59 

Developments  of  the  Clearing-house  system,  possible 23 

Dishonored  bills,  Tokio  Clearing-house,  refusal  to  pay 343 

Dishonored  items,  Tokio  Clearing-house 341 

Disposition  of  interest  charged  on  loan  certificates 125 

Dominion  of  Canada,  banking  and  currency  systems  of  the 297 

Donation  of  fines,  Philadelphia 221 

Draft 6 

settling  by 42,  45 

Drafts,  extensive  use  of  checks  and 62 

foreign  46 

Due-bill,  Philadelphia  Clearing-house 213 

runners'  exchange,  Philadelphia   211 

Duties  and  powers  of  Tokio  Clearing-house  committee 344 

Duties  of  Canadian  Clearing-house  boards 301 

Duties  of  officers,  New  York  Clearing-house 140 

Duties,  Canadian  Clearing-house  managers' 302 

of  manager 30 

of  manager,  Boston  245 

of  officers  and  committees,  St.  Louis  Clearing-house 288 

of  president  28 

of  settling  clerk,  Tokio  Clearing-house 340 

of  treasurer  : 29 

of  vice-president ; 29 

Duty  of  loan  committee 82 

Election  of  officers  and  committees,  Boston 244 

Endorsements,  Chicago  Clearing-house,  restricted 278 

Entering  balances,  London,  sheet  for 328 

Error  in  clerks'  sheets,  method  of  finding,  New  York 188 

Errors,  fines  for 56 

fines  for,  Cincinnati  57 

fines  for,  Louisville,  Ky 57 

or   deficiencies    in    contents   of   sealed   bags   or   packages, 

reclamations  for,  New  York 196 

Examination  of  items,  Canadian  Clearing-houses 310 

Examination  of  securities  in  the  custody  of  Philadelphia  Clear- 
ing-house committee   220 

Examiners,  special  bank 25 

Exchange  5 

bill  of 5 

charges  for,  Denver,  Colo 19 

charges  on  collections,  St.  Joseph,  Mo 21 

charges  on  collections.  West  Superior,  Wis 19 

Chicago  Clearing-house,  routine  of 266 


INDEX 


363 


PAGE 

Exchange,  collection  charges,  New  York 22 

committee  31,  32 

fixing  uniform  rates  of 14 

Houston,  Tex.,  rate  of 15 

of  checks,  Chicago  Clearing-house 268 

of  items,  results  of 35 

Philadelphia   runners'    210 

Philadelphia,  William  H.  Rhawn,  proposed  introduction  of 

second   210 

rates  of,  Buffalo  agreement 14 

rates  of,  fixing  uniform  loi 

rates  of,  in  Baltimore,  1897 15 

routine  of.  New  York 179 

system  of  collection  charges,  St,  Louis,  Mo 17 

ticket,  foreign  department,  Boston  Clearing-house 253 

Topeka,  Kan.,  rates  of 17 

Toledo,  O.,  rate  of  charges 16 

Exchange  slip,  form  of.  New  York 177 

New  York   176 

Exchanges  brought  to  the  New  York  Clearing-house  by  one 

bank,  greatest  amount  of 208 

Exchanges,  Canadian  Clearing-houses,  routine  of 304 

Chicago  Clearing-house,  hours  of 265 

Chicago  Clearing-house,  records  of 281 

Clearing-house   47 

hour  of  daily 48,  50 

method  of  conducting  the 54 

New  York  Clearing-house,  hour  of 175 

taken  from  the   New   York  Clearing-house  by   one  bank, 

greatest  amount  of  208 

through  a  member  bank,  New  York  Clearing-house,  resolu- 
tion authorizing I53 

time  allowed  for  making,  New  York 184 

time  required  to  make 56 

Expenditures,  Tokio  Clearing-house,  rules  relating  to 345 

Expense  of  printing,  St.  Louis  Clearing-house 288 

Expenses,   Boston,  assessment  for 242 

of  Chicago  Clearing-house   278 

of  Japanese  Clearing-houses  33^ 

of  printing.  New  York I99 

of  Tokio  Clearing-house 342 

Philadelphia,  assessment  for  221 

pro  rating,  of  New  York 'pS 

St.  Louis  Clearing-house,  assessment  for 289 

Express,  shipping  currency  by ;  •  •  •     24 

Expulsion  and   suspension  of  members.   New  York   Clearing- 
house      149 

Expulsion  of  members,  Boston  243 

Canadian  Clearing-houses    3^^ 

Chicago   Clearing-house   280 

St.   Louis  Clearing-house 286 

Expulsion  of  Tokio  Clearing-house  members 343 

Extending  of  loans  to  the  government 12 

Extensive  use  of  checks  and  drafts 02 


364  INDEX 


PAGE 


Fac-simile  of  back  of  check  drawn  by  Woodward  Brothers... .     75 

Fac-simile  of  check,  the  journey  of  which  is  shown  on  map ^2) 

Fac-simile  of  credit  voucher  used  at  Toronto 313 

Fac-simile  of  debit  list,  St.  Louis  Clearing-house 291 

Fac-simile  of  debit  voucher  used  at  Toronto 315 

Fac-simile  of  first  delivery  voucher,  Toronto  Clearing-houses.  307 
Fac-simile  of  second  delivery  voucher,  Toronto  Clearing-houses  309 
Fac-simile  of  small  ticket  deposited  by  messenger  with  settling 

clerk.  New  York  179 

Failure,  Canadian  Clearing-houses,  single  instance  of 303 

of  Keystone  national  bank 225 

of  members  of  Chicago  Clearing-house 264 

Failures  of  members,  Philadelphia 224 

Fall  River,  Mass.,  cashier  of  Clearing-house 57 

clearing  at  58 

Fargo,  So.  Dak.,  clearing  for  out-of-town  correspondents 51 

clearing  regulations    51 

Features  of  Atlanta  loan  certificates,  special 117 

Fee,  Chicago  Clearing-house,  admission 279 

New  York  Clearing-house,  admission 148 

Fines  enforced  by  Chicago  Clearing-house 278 

Fines  for  errors  56 

Fines  for  tardiness  54 

Milwaukee,  Wis 54 

Fine  for  transfer  of  Clearing-house  certificates,  New  York 190 

Fines,  foreign  department,  Boston  Clearing-house 254 

Philadelphia,  donation  of 221 

St.  Louis  Clearing-house   289 

scale  of.  New  York 201 

First  delivery  voucher,  Toronto  Clearing-house,  fac-simile  of. .  307 

First  issue  of  Clearing-house  loan  certificates 84 

First  issue  of  loan  certificates  by  New  York  association 90 

First  or  credit  ticket,  form  of,  New  York 178 

First  ticket,  New  York 176 

Fixing  uniform  rates  of  exchange 14 

Fixing  uniform  rates  of  interest  on  deposits 13 

Foreign  check  ticket,  Boston  Clearing-house,  foreign  slip  and.  255 

Foreign  department  Boston  Clearing-house 22,  246 

book-keeping  employed  in   260 

exchange  ticket   253 

fines 254 

form  of  letter  of  transmission  to  correspondents 259 

form  of  settling  clerk's  statement 261 

forms  used  by 256 

hours  for  clearing 251 

ledger  employed  by   260 

letter-form  used  in  transmitting  checks 258 

organization   of    246 

receipt 257 

regulations  for  collection  of  out-of-town  checks 251 

report  of  committee  on 246 

resolution  adopted  by  collecting  banks 251 

rules  and  regulations  governing 248 

settling  clerk's  statement  258 


INDEX 


365 


PAGE 

Foreign  drafts 45 

Foreign  slip  and  foreign  check  ticket,  Boston  Clearing-house.!  255 

Form  for  entering  credit  balances,  London 331 

Form  for  entering  debit  balances,  London 331 

Form  for  listing  balances,  St.  Louis 293 

Form  of  Clearing-house  loan  certificate,   used  by   New   York 

Clearing-house  in  1873   gg 

used  in  Atlanta,  Ga up 

used  in  Baltimore  107 

used  in  Birmingham,  Ala 121 

used  in  Boston  105 

used  in  Cincinnati 113 

used  in  Detroit 115 

used  in  New  Orleans 109 

used  in  Philadelphia 93 

Form  of  delivery  clerk's  receipts,  New  York 182 

Form  of  delivery  statement  employed  at  Toronto 305 

Form  of  delivery  statement,  Toronto  Clearing-houses 305 

Form  of  exchange  slip,  New  York 177 

Form  of  first  or  credit  ticket,  New  York 178 

Form  of  gold  certificate,  back.  New  York 193 

face,  New  York  192 

Form  of  letter  of  transmission  to  correspondents,  foreign  de- 
partment, Boston  Clearing-house   259 

Form  of  order  on  Chicago  Clearing-house  manager  for  balance 

due    275 

Form  of  order  used  in  transferring  balances   that  have   been 

loaned,  Chicago  273 

Form  of  proof  clerk's  sheet.  New  York 187 

Form  of  proof  used  in  Toronto  Clearing-house 311 

Form  of  second  ticket,  New  York 185 

Form  of  settling  clerk's  report  to  his  bank  of  daily  balances, 

New  York  189 

Form  of  settling  clerk's  statement,  foreign  department,  Boston 

Clearing-house   261 

New  York   183 

Form  of  statement  of  weekly  averages  of  Brooklyn  non-member 

banks 156 

Form  of  statement  required  by  the  New  York  Clearing-house 

association  of  trust  companies 159 

Form  of  statement  required  of  associated  banks.   New   York 

Clearing-house 164 

Form  of  summary  of  weekly  statement  of  the  associated  banks 

of  the  city  of  New  York • 163 

Form  used  at  New  York  Clearing-house,  in  tabulating  national 

bank  statements  160 

in  tabulating  State  bank  statements 161 

Formation  of  Chicago  Clearing-house,  date  of 263 

Forms  of  reports  used  in  trading  balances,  Chicago 271 

Forms  used  by  foreign  department.  Boston  Clearing-house 256 

Fourth  issue  of  Clearing-house  loan  certificates 88 

Functions  of  a  Clearing-house,  special ii 

Functions  of  Clearing-houses I 


366  INDEX 

PACE 

Fund,  Boston,  trust  238 

New  York  Clearing-house  building 136 

Furniture,  arrangement  of  47 

Gallatin,  Albert,  suggestions  on  banks  and  currency  of  the  sev- 
eral United  States  130 

Gallery,  New  York  Clearing-house,  manager's 175 

Gilpin,  William  J.,  present  assistant  manager  New  York  Clear- 
ing-house      144 

Gold  certificate,  back,  form  of,  New  York 193 

face,  form  of,  New  York 192 

Gold  depository 42,  45 

Clearing-house,  New  York  194 

Government,  extending  of  loans  to  the 12 

of  Canadian  Clearing-houses 301 

Greatest  amount  of  exchanges  brought  to  the  New  York  Clear- 
ing-house by  one  bank 208 

Greatest  amount  of  exchanges  taken  from  New  York  Clearing- 
house by  one  bank 208 

Green  ticket  for  receipts,  London 332 

Growth  of  Japanese  Clearing-house  business,  illustration  of . . . .  339 

Guarantee  of  indorsements  53 

Handling  collections  at  Detroit,  method  of 59 

Holyoke,  Mass.,  clearing  regulations 51 

Hour  of  daily  exchanges 48,  50 

Hour  of  exchanges,  New  York  Clearing-house 175 

Hours  for  clearing,  foreign  department,  Boston  Clearing-house  251 

Hours  of  exchanges,  Chicago  Clearing-house 265 

Hours  of  clearing,  Japanese  Clearing-houses 336 

Tokio  Clearing-house   340 

Houston,  Tex.,  rate  of  exchange 16 

Incorporation  of  Chicago  Clearing-house 264 

Indorsements,  guarantee  of  53 

restricted 52 

restrictive  or  qualified,  New  York 197 

Institutions  clearing  through  St.  Louis  Clearing-house  associa- 
tion, outside   287 

Interest,  borrowing  and  loaning  balances  without 42,  44 

borrowing  and  loaning  balances  with 42,  44 

charged  on  loan  certificates,  disposition  of 125 

on  certificates,  methods  of  calculating 123 

rates  on  loan  certificates 82 

Interest  on  deposits,  fixing  uniform  rates  of 13 

uniform  rates  of 24 

Introduction  of  New  York  methods  in  London  Clearing-house  323 

Issue  of  Clearing-house  loan  certificates 22 

first  84 

second  87 

third  87 

fourth 88 

Issue  of  Clearing-house  certificates,  New  Orleans,  ratification  of  112 


INDEX 


367 


PAGE 

Issue  of  loan  certificates,  in  1873 88 

in   1890 gg 

at  Atlanta  in  1893 , 117 

at  Baltimore  in  1873 94 

at  Baltimore  in  1893 108 

at  Birmingham  in  1893 117 

at  Boston  in  1893 106 

at  Boston  in  1895 122 

at  Buffalo  in  1893 114 

at  Chattanooga,  Tenn.,  in  1893 120 

at  Cincinnati  in  1893 114 

at  Detroit  in  1893 116 

at  Louisville,  Ky.,  in  1891 102 

at  New  Orleans  in  1879 97 

at  New  Orleans  in  1896 122 

at  New  York  in  1884 97 

at  New  York  in  1893 104 

at  Philadelphia  in  1890 102 

at  Philadelphia  in  1893 108 

at  Pittsburg  in  1893 116 

at  St.  Louis  in  1873 95 

by  Boston  in  1873 91 

by  New  York  association,  first 90 

by  New  York  association,  second 90 

New  Orleans,  protection  against  loss  from 112 

Issues  of  loan  certificates,  at  New  York,  aggregate  of 106 

Item 8 

Items,  Canadian  Clearing-houses,  examination  of 310 

methods  of  delivering 55 

results  of  exchange  of 35 

Tokio  Clearing-house,  dishonored  341 

Itinerary,  map  showing  check's  J7 

Japanese  Clearing-house  business,  illustration  of  growth  of 339 

Japanese  Clearing-houses 335 

average  daily  balances  and  clearings 2)Z^ 

borrowing  and  loaning  balances  336 

clearing  for  non-members  ZZl 

clearing  matter 336 

expenses  of ZZ^ 

hours  of  clearing ZZ^ 

location  of  335 

number  of 335 

number  of  clearings 336 

settlement  of  balances   Z^ 

Journey  of  a  country  check 68 

Journey  of  check  drawn  by  Woodward  Brothers 74 

Keystone  national  bank,  failure  of ; 225 

Kinds  of  money  employed  in  settling  balances,  Chicago  Clear- 

ing-house 268 

Kioto  Clearing-house  association  336 

Kobe  Clearing-house  association  336 


368  INDEX 

PAGE 

Labelled  packages,  money  in 38 

Largest  balance  from  one  day's  exchanges,  New  York  Clearing- 
house    208 

Largest  balance  paid  by  New  York  Clearing-house  to  one  bank  208 
Largest  balance  paid  to  New  York  Clearing-house  by  single  in- 
stitution  208 

Largest  transactions  for  one  day,  New  York  Clearing-house...  207 
Ledger   employed   by   foreign    department,    Boston    Clearing- 
house    260 

Legal  tender  certificates 42,  45 

Letter-form  used  in  transmitting  checks,  foreign  department, 

Boston  Clearing-house  258 

Letter  of  transmission  to  correspondents,  foreign  department, 

Boston  Clearing-house,  form  of 259 

Liability  for  manager's  checks 42 

Liability  of  members  clearing  for  outside  institutions,  St.  Louis 

Clearing-house   287 

Limiting  amount  of  payment,  New  Orleans,  resolution 114 

Listing  balances,  St.  Louis,  form  for 293 

Liquidation   of  balances,   Clearing-house   certificates   in.    New 

York 190 

List,  St.  Louis,  fac-simile  of  debit 291 

Loan  certificate,  used  by  New  York  Clearing-house  in   1873, 

form  of  89 

used  in  Atlanta,  Ga.,  form  of  Clearing-house 119 

used  in  Boston,  form  of  Clearing-house 105 

used  in  Cincinnati,  form  of  Clearing-house 113 

used  in  New  Orleans,  form  of  Clearing-house 109 

used  in  Philadelphia,  form  of  Clearing-house 93 

Loan  certificates,  at  Atlanta  in  1893,  issue  of 117 

at  Baltimore  in  1873,  issue  of 94 

at  Baltimore  in  1893,  issue  of 108 

at  Birmingham  in  1893,  issue  of 117 

at  Boston  in  1893,  issue  of 106 

at  Boston  in  1895,  issue  of 122 

at  BuflFalo  in  1893,  issue  of 114 

at  Chattanooga,  Tenn.,  in  1893,  issue  of 120 

at  Cincinnati  in  1893,  issue  of 114 

at  Detroit  in  1893,  issue  of 1 16 

at  Louisville,  Ky.,  in  1891,  issue  of 102 

at  New  Orleans  in  1879,  issue  of 97 

at  New  Orleans  in  1896,  issue  of 122 

at  New  York,  aggregate  of  issues  of 106 

at  New  York  in  1884,  issue  of 97 

at  New  York  in  1893,  issue  of 104 

at  Philadelphia  in  1890,  issue  of . . .  .* 102 

at  Philadelphia  in  1893,  issue  of 108 

at  Pittsburg  in  1893,  issue  of 116 

at  St.  Louis  in  1873,  issue  of 05 

attitude  of  banks  toward 83 

Boston  231 

by  Boston  in  1873,  issue  of 91 

by  New  York  association,  first  issue  of 90 


INDEX  369 

PAGE 

Loan  certificates,  by  New  York  association,  second  issue  of...     90 

by  Philadelphia  in  1873,  authorization  of 91 

Chicago,  Clearing-house 280 

Clearing-house  42,  45,  79 

criticism  of ' 125 

decision  of  Pennsylvania  courts  regarding 126 

denominations  of 82 

description  of  Clearing-house  79 

disposition  of  interest  charged  on 125 

first  issue  of  Clearing-house 84 

second  issue  of  Clearing-house 87 

third  issue  of  Clearing-house 87 

fourth  issue  of  Clearing-house 88, 

in  1873,  issue  of 88 

in  1890,  issue  of 99 

interest  rates  on 82 

issued  in  1890,  provision  for  retirement  of 99 

issue  of  Clearing-house  22 

New  Orleans,  obligation  with  regard  to 112 

New  Orleans,  protection  against  loss  from  issue  of 112 

origin  of  Clearing-house  loan 80 

resolution  adopted  by  New. York  association  in  1890  with 

regard  to   98 

resolution  passed  at  Philadelphia  in  1890  with  regard  to loi 

resolution  passed  by  New  Orleans  association  with  regard 

to 108 

resolution  passed  by  Richmond  association  in  1893  with  re- 
gard to   120 

retirement  of 82 

special  features  of  Atlanta 117 

St.  Louis  Clearing-house  285 

used  in  Baltimore,  form  of  Clearing-house 107 

used  in  Birmingham,  Ala.,  form  of  Clearing-house 121 

used  in  Detroit,  form  of  Clearing-house 115 

value  of  Clearing-house   81 

Loan  committee 31 

duty  of 82 

for  certificates,  application  to  New  Orleans iii 

Loan  committees 81 

Loaning  balances,  Boston,  borrowing  and 233 

Japanese  Clearing-houses,  borrowing  and 336 

with  interest,  borrowing  and 42,  44 

without  interest,  borrowing  and 42,  44 

Loans  to  members,  Chicago  Clearing-house 280 

Loans  to  the  government,  extending  of 12 

Local  check 9 

Location  of  Boston  Clearing-house 231 

Location  of  Chicago  Clearing-house 265 

Location  of  Clearing-house  47 

Location  of  Japanese  Clearing-houses 335 

Location  of  London  Clearing-house 323 

Location  of  New  York  Clearing-house,  original I34 

second  ^35 


370  INDEX 

PAGE 

Location  of  New  York  Clearing-house,  third 137 

London  Clearing-house 321 

location  of 323 

origin  of  321 

Long  Island  banks,  clearing  system  for 66 

Long  Island  City,  Queens  county  bank 66 

Los  Angeles,  Cal.,  clearing  regulations 51 

Loss  from  issue  of  loan  certihcates,  New  Orleans,  protection 

against 112 

Louisville,  Ky.,  in  1891,  issue  of  loan  certificates  at 102 

for  error,  fines  57 

Lowell,  Mass.,  clearing  regulations 55 

Lyman,  George  D.,  first  manager  New  York  Clearing-house..  142 

Manager  and  secretary,  Tokio  Clearing-house,  rules  relating  to.  344 

Manager,  Boston,  duties  of 245 

duties  of 30 

Manager  for  balance  due,  form  of  order  on  Chicago  Clearing- 
house   275 

order  on  Chicago  Chicago  Clearing-house 274 

Manager  New  York  Clearing-house,  George  D.  Lyman,  first. .   142 

William  A.  Camp,  second 142 

William  Sherer,  present  142 

Manager's  and  assistant  manager's  rooms.  New  York  Clear- 
ing-house, view  in 143 

Manager's  bond 29 

Manager's  certificates,  St.  Louis 292 

Manager's  check,  advantages  of 44 

Manager's  checks  42 

liability  for 42 

Manager's  duties,  Canadian  Clearing-house 302 

Manager's  gallery.  New  York  Clearing-house 175 

Manager's  receipt.  New  York 191 

Manager's  records  of  transactions,  St.  Louis  Clearing-house...  294 

Manager's  report  of  clearings,  St.  Louis 295 

Manager's  settlement  sheets,  Tokio  Clearing-house 341 

Manager's  settling  sheet,  Toronto  Clearing-houses 306 

Map  showing  check's  itinerary "jy 

Matter,  Canadian  Clearing-houses,  clearing 317 

clearing  8 

clearing,  New  York  197 

for  clearings,  St.  Louis  Clearing-house,  proper 294 

Japanese   Clearing-houses,   clearing 336 

Medium  of  settlement,  Canadian  Clearing-houses 316 

Meeting,  annual 33 

Chicago  Clearing-house,  annual   282 

Meetings  of  Boston  association 244 

Meetings,  Tokio  Clearing-house,  kinds  of 343 

Member  bank,  New  York  Clearing-house,  resolution  authoriz- 
ing exchanges  through  a iS3 

Members,  Boston,  expulsion  of 243 

Boston,  withdrawals  of  243 

Canadian  Clearing-houses,  defaulting 316 


INDEX  371 

PAGE 

Members,  Canadian  Clearing-houses,  expulsion  of 303 

Canadian  Clearing-houses,  withdrawals  of 303 

Chicago  Clearing-house,  expulsion  of 280 

Chicago  Clearing-house,  statement  of  condition  of 277 

Chicago  Clearing-house,  withdrawals  of 279 

clearing  for  outside  institutions,  St.  Louis  Clearing-house, 

liability  of 287 

deposit  with  Tokio  Clearing-house 342 

expulsion  of  Tokio  Clearing-house 343 

mutual  assistance  of  12 

New  York  Clearing-house,  admission  and  conduct  of 148 

New  York  Clearing-house,  expulsion  and  suspension  of...   149 

of  Chicago  Clearing-house,  failure  of 264 

of  Tokio  Clearing-house   338 

Philadelphia,  failures  of 224 

Philadelphia,  suspension  of 222 

St.  Louis  Clearing-house,  admission  of 286 

St.  Louis  Clearing-house,  expulsion  of 286 

St.  Louis  Clearing-house,  suspension  of 286 

Tokio  Clearing-house,  retirement  of 343 

treatment  of  defaulting,  New  York. . .' 194 

Membership,  Boston,  admissions  to 243 

Chicago  Clearing-house,   application  for 279 

Chicago  Clearing-house,  restrictions  of 279 

in  Chicago  Clearing-house,  requirements  for 264 

New  York  Clearing-house,  statistics  of 147 

Philadelphia,  application  for  222 

Membership  in  Tokio  Clearing-house,  application  for 342 

banks  eligible  to   342 

Membership  of  Chicago  Clearing-house,  original 263 

present 263 

Membership  of  St.  Louis  Clearing-house  association 286 

Messenger  with  settling  clerk,  fac-simile  of  small  ticket  de- 
posited by.  New  York 179 

Messengers  and  settling  clerks 53 

Method  of  carrying  checks  to  Clearing-house 53 

Method  of  collecting  country  checks 68 

Method  of  conducting  the  exchanges 54 

Method  of  finding  error  in  clerks'  sheets,  New  York 188 

Method  of  handling  collections  at  Detroit 59 

Method  of  settlement,  Chicago  Clearing-house 268 

Method  of  settling  balances,  Philadelphia 212 

Methods  of  calculating  interest  on  certificates 123 

Methods  of  delivery,  Baltimore 54 

Cincinnati  54 

Methods  of  delivering  items 55 

Methods  of  settlement  of  balances 36 

Milwaukee  fines  for  tardiness 54 

Money  and  certificates  used  in  settlement  of  balances,  record 

of.  New  York I94 

Money  centre  6 

Money  employed  in  settling  balances,  Chicago  Clearing-house, 

kinds  of 268 


372  INDEX 

PAGE 

Money  in  labelled  packages 38 

Money  paid  in  packages,  New  York 188 

Money,  settling  balances  without 40 

settlements  of  balances  with 2i7 

Mutual  assistance  of  members 12 

National  bank  statements,  form  used  at  New  York  Clearing- 
house in  tabulating 160 

National  banks.  New  York  Clearing-house,  skeleton  of  quar- 
terly statement  of  165 

National  Clearing-house 65 

New  Bedford,  Mass.,  clearing  at 58 

two  clearings  per  day 57 

New  Haven,  Conn,,  clearing  regulations 51 

New   Orleans  associated  banks^   communication  addressed  to 

cashiers  of  no 

resolution  passed  by  boards  of  directors  of iii 

New  Orleans  association  with  regard  to  loan  certificates,  reso- 
lution passed  by   108 

New  Orleans  clearing  regulations 52 

New  Orleans,  form  of  Clearing-house  loan  certificate  used  in..  109 

in  1879,  issue  of  loan  certificates  at 97 

in  1896,  issue  of  loan  certificates  at 122 

loan  committee  for  certificates,  application  to in 

obligation  with  regard  to  loan  certificates 112 

protection  against  loss  from  issue  of  loan  certificates 112 

ratification  of  issue  of  Clearing-house  loan  certificates 112 

resolution  limiting  amount  of  payment 114 

New  York,  aggregate  of  issues  of  loan  certificates  at 106 

agreement  to  comply  with  rules  and  regulations  regarding 

collections  outside  of 172 

New  York  association,  first  issue  of  loan  certificates  by 90 

in  1890,  with  regard  to  loan  certificates,  resolution  adopted 

by  98 

second  issue  of  loan  certificates  by 90 

New  York  Clearing-house  127 

admission  and  conduct  of  members 148 

admission  fee   148 

application  to  clear  for  another  bank 154 

arbitration  committee   146 

association  of  trust  companies,  form  of  statement  required 

by  the   159 

building  company  137 

building  fund   136 

clearing  for  non-members  150 

Clearing-house  committee  144 

Clearing-room  of 49 

committee  on  admissions 146 

committees  of 144 

conference  committee    145 

consent  to  clear  for  another  bank 155 

daily  routine  of  the 175 

defects  of  original  system 129 


INDEX  373 


PAGE 


New  York  Clearing-house,  duties  of  officers 140 

expulsion  and  suspension  of  members 149 

form  of  statement  required  of  associated  banks 164 

George  D.  Lyman,  first  manager 142 

hour  of  exchanges 175 

in  1873,  form  of  loan  certificate  used  by 89 

ki  tabulating  national  bank  statements,  form  used  at 160 

in  tabulating  State  bank  statements,  form  used  at 161 

manager's  gallery    175 

nominating  committee 146 

original  location  of 134 

origin  of  127 

provisions  of  constitution    140 

records  of  the 173 

relationship  of  trust  companies  to 157 

resolution  authorizing  exchanges  through  a  member  bank.  153 

rules  and  regulations  regarding  outside  collections 168 

second  location  of 135 

skeleton  of  quarterly  statement  of  national  banks 165 

skeleton  of  weekly  statement  of  non-member  banks 167 

statistics  of  membership  147 

third  location  of 137 

view  down  Cedar  street 141 

view  in  Clearing-room  181 

view  of 139 

view  in  manager's  and  assistant  manager's  rooms 143 

William  A,  Camp,  second  manager 142 

William  J.  Gilpin,  assistant  manager 144 

William  Sherer,  present  manager 142 

New  York  Clearing-room,  description  of 175 

New  York,  collections  outside  the  city  of 168 

form   of  summary   of  weekly   statement  of  the   associated 

banks  of  the  city  of 163 

in  1884,  issue  of  loan  certificates  at 97 

in  1893,  issue  of  loan  certificates  at 104 

methods  in  London  Clearing-house,  introduction  of 323 

out-of-town  items,  collecting 22 

skeleton  of  the  quarterly  statement  of  the  condition  of  the 

State  banks  of  the  city  of 166 

skeleton  of  the  weekly  statement  of  the  associated  banks 

of  the  city  of 162 

time  required  to  make  exchanges 56 

Nominating  committee  3i>  32 

New  York  Clearing-house 146 

Non-member  banks,  Chicago  Clearing-house 276 

form  of  statement  of  weekly  averages  of  Brooklyn 156 

New  York  Clearing-house,  skeleton  of  weekly  statement  of  167 

Non-members,  Canadian  Clearing-houses,  clearing  of '304 

Japanese  Clearing-houses,  clearing  for 337 

New  York  Clearing-house,  clearing  for 150 

Tokio  Clearing-house,  clearing  for 343 

Notes,  Canadian  Clearing-houses,  treatment  of 317 

in  settlement  of  balances,  Boston,  circulating 229 


374  INDEX 


PAGE 


Notifying   manager   of   amounts   paid   in   making   settlements, 

tickets  used  by  Boston  banks  for 234 

Number  of  banks  belonging  to  Canadian  Clearing-houses 302 

Number  of  clearings,  Japanese  Clearing-houses 336 

Number  of  Japanese  Clearing-houses 335 

Number  of  transactions,  New  York 176 

Object  of  a  Clearing-house,  primary 11 

Object  of  Tokio  Clearing-house 340 

Objection  to  country  checks 64 

Objection  to  silver  ;^S 

Objects  of  Canadian  Clearing-houses 300 

Obligation  with  regard  to  loan  certificates,  New  Orleans 112 

Officers  and  committees,  Boston,  election  of 244 

St.  Louis  Clearing-house,  duties  of 288 

Officers  of  a  Clearing-house  28 

Officers,  New  York  Clearing-house,  duties  of •  140 

St.  Louis  Clearing-house,  provision  regarding 287 

Operations  of  Clearing-house,  St.  Louis 289 

Opposition  to  adoption  of  constitution.   New  York  Clearing- 
house    134 

Order  on   Chicago   Clearing-house   manager  for  balance  due, 

form  of  275 

Order  used   in  transferring  balances   that   have   been   loaned, 

Chicago,  form  of 273 

Orders,  Chicago  Clearing-house,  settlements  of  amounts  of.  ...  274 

Organization,  Boston,  date  of 228 

of  foreign  department  of  Boston  Clearing-house 246 

of  Philadelphia  Clearing-house  association,  date  of 209 

of  St.  Louis  Clearing-house  association 285 

Origin  of  Clearing-house  loan  certificates 80 

Origin  of  London  Clearing-house 321 

Origin  of  New  York  Clearing-house 127 

Original  location  of  New  York  Clearing-house 134 

Original  membership  of  Chicago.  Clearing-house 263 

Original  system.  New  York  Clearing-house,  defects  of 129 

Osaka  Clearing-house  association 335 

Out-of-town    checks,    foreign    department,    Boston    Clearing- 
house, regulations  for  collection  of 251 

Out-of-town  correspondents,  Fargo,  So.  Dak.,  clearing  for 51 

Out-of-town  items,  collecting.  New  York 22 

Outside  banks  and  trust  companies,  Boston,  clearing  for 238 

Outside  collections.  New  York  Clearing-house,  rules  and  regu- 
lations regarding  168 

Outside  institutions  clearing  through  St.  Louis  Clearing-house 

association   287 

Outside  the  city  of  New  York,  collections 168 

Packages,  money  in  labelled 38 

money  paid  in.  New  York 188 

Payment  of  balances.  Canadian  Clearing-houses 3^4 

Payment  of  debit  balances.  New  York 188 

Payment,  New  Orleans,  resolution  limiting  amount  of 114 


INDEX  375 

PAGE 

Payments,  London,  white  ticket  for ^^^ 

Penalties,  Tokio  Clearing-house,  rules  regarding 345 

Pennsylvania  courts  regarding  loan  certificates,  decision  of..!'.   126 

Personal  check p 

Philadelphia,  form  of  Clearing-house  loan  certificate  used  in...     93 

in  1873,  authorization  of  loan  certificates  by 91 

in  1890,  issue  of  loan  certificates  at 102 

in  1890,  with  regard  to  loan  certificates,  resolution  passed  at  loi 

in  1893,  issue  of  loan  certificates  at 108 

runners'  exchange  210 

the  Clearing-house  association  of  the  banks  of 209 

two  clearings  per  day 57 

Pittsburg  in  1893,  issue  of  loan  certificates  at 116 

Plan  of  administration  in  Canada 33 

Powers  of  Tokio  Clearing-house  committee,  duties  and 344 

President,  duties  of 28 

Primary  object  of  a  Clearing-house 11 

Printing,  expenses  of  New  York 199 

St.  Louis  Clearing-house,  expense  of 288 

Proof  clerk's  sheet,  form  of,  New  York 187 

Proof  used  in  Toronto  Clearing-house,  form  of 311 

Proper  matter  for  clearings,  St.  Louis 294 

Property,  purchase  of  Cedar  street 138 

Pro  rating  of  expenses,  New  York 198 

Protection  against  loss  from   issue   of  loan  certificates.    New 

Orleans  112 

Provision  for  retirement  of  loan  certificates  issue  in  1890 99 

Provision  regarding  officers,  St.  Louis  Clearing-house 287 

Provision  regarding  statements,  Philadelphia 216 

Provision  respecting  changes  of  constitution  and  by-laws,  Tokio 

Clearing-house   345 

Provisions  of  constitution.  New  York  Clearing-house 140 

Provisions  relating  to  Tokio  Clearing-house  committee 344 

Purchase  of  Cedar  street  property 138 

Qualified  indorsements,  restrictive  or,  New  York 197 

Quarterly  statement  of  national  banks,  New  York  Clearing- 
house, skeleton  of 165 

Quarterly  statement  of  the  condition  of  the  State  banks  of  the 

city  of  New  York,  skeleton  of  the 166 

Queens  county  bank.  Long  Island  City 66 

Rank  of  St.  Louis  Clearing-house 296 

Rate  of  charges,  Toledo,  0 16 

Rate  of  exchange,  Buffalo  agreement 14 

Houston,  Tex 16 

Rate  on  average  balances  at  St.  Joseph,  Mo 13 

Rate  on  bank  balances  at  Sioux  City,  la 13 

Rates  of  exchange,  Baltimore,  1897 IS 

fixing  uniform _ ^4 

Rates  of  interest  on  deposits,  fixing  uniform 13 

uniform   24 

Rates  for  collection,  Topeka,  Kan 16 


376  INDEX 

PAGE 

Rates  on  loan  certificates,  interest  82 

Ratification  of  issue  of   Clearing-house  certificates,   New   Or- 
leans     112 

Ratio  of  balances  to  clearings 36 

Receipt  for  balance,  Buffalo 39,  40,  41 

Receipt,  manager's.  New  York '191 

Receipts,  delivery  clerk's.  New  York 179 

form  of  delivery  clerk's,  New  York 182 

London,  green  ticket  for 332 

Reclamations  for  errors  or  deficiencies  in  contents  of  sealed 

bags  and  packages.  New  York 196 

Record  of  exchanges,  Chicago  Clearing-house 281 

Record  of  money  and  certificates  used  in  settlement  of  balances, 

New  York  194 

Records  of  the  New  York  Clearing-house 173 

Records  of  transactions,  St.  Louis  Clearing-house,  manager's..  294 

Refusal  to  pay  dishonored  bills,  Tokio  Clearing-house 343 

Regulations  for  collection  of  out-of-town  checks,  foreign  de- 
partment, Boston  Clearing-house  251 

Regulations  governing  foreign  department,   Boston   Clearing- 
house, rules  and    248 

Regulations  of  Tokio  Clearing-house,  rules  and 340 

Regulations  regarding  outside  collections.  New  York  Clearing- 
house, rules  and 168 

Relationship  of  trust  companies  to  New  York  Clearing-house. .   157 

Remedy  for  country  checks 64 

Reorganization  of  Tokio  Clearing-house  ^;i7 

Report  of  balances,  New  York 184 

Report  of  clearings,  St.  Louis,  manager's 295 

Report  of  committee  on  foreign  department,  Boston  Clearing- 
house    246 

Report  to  his  bank  of  daily  balances,  form  of  settling  clerk's. 

New  York 189 

Reports  used  in  trading  balances,  Chicago,  forms  of 271 

Requirements  for  membership  in  Chicago  Clearing-house 264 

Resolution  adopted  by  Cincinnati  association  with   regard  to 

loan  certificates    95,  96 

Resolution  adopted  by  collecting  banks,  foreign  department, 

Boston  Clearing-house   251 

Resolution  adopted  by  New  York  association  in  1890,  with  re- 
gard to  loan  certificates 98 

Resolution   authorizing   exchanges   through    a   member   bank. 

New  York  Clearing-house i53 

Resolution  limiting  amount  of  payment.  New  Orleans 114 

Resolution  passed  at  Philadelphia  in  1890,  with  regard  to  loan 

certificates    loi 

Resolution  passed  by  boards  of  directors  of  New  Orleans  as- 
sociated banks 1 1 1 

Resolution  passed  by  New  Orleans  association,  with  regard  to 

loan  certificates   ^ 108 

Resolution  passed  by  Richmond  association  in  1893,  with  regard 

to  loan  certificates 120 

Responsibility  of  association  for  balances,  New  York I95 


INDEX  377 

PAGE 

Restricted  indorsements  52 

Chicago  Clearing-house   278 

Restrictions  of  membership,  Chicago  Clearing-house 279 

Restrictive  or  qualified  indorsements,  New  York 197 

Results  of  exchange  of  items 35 

Retirement  of  loan  certificates 82 

issued  in  1890,  provision  for 99 

Retirement  of  members,  Tokio  Clearing-house 343 

Return,  Boston,  average  weekly 240 

Rhawn,  William  H.,  proposed  introduction  of  second  exchange, 

Philadelphia 210 

Richmond  association  in  1893,  with  regard  to  loan  certificates, 

resolution  passed  by   120 

Richmond,  Va.,  associated  banks,  certificate  of  deposit  used  by    43 

Rochester,  N.  Y.,  schedule  of  collection  charges 15 

Rockford,  111.,  clearing  regulations 52 

Roll  call  of  clerks.  West  Superior,  Wis 54 

Rooms,  New  York  Clearing-house,  view  in  manager's  and  as- 
sistant manager's 143 

Routine  of  exchange,  Chicago  Clearing-house 266 

New  York  179 

Routine  of  exchanges,  Canadian  Clearing-houses 304 

Routine  of  the  New  York  Clearing-house,  daily * 175 

Rules  and  regulations  governing  foreign  department,   Boston 

Clearing-house   248 

Rules  and  regulations  of  Tokio  Clearing-house 340 

Rules  and  regulations   regarding   collections  outside  of   New 

York,  agreement  to  comply  with 172 

Rules  and  regulations  regarding  outside  collections,  New  York 

Clearing-house   168 

Rules  concerning  Tokio  clearing  banks 342 

Rules  for  clearing,  Tokio  Clearing-house 340 

Rules  of  Tokio  Clearing-house 337 

Rules  regarding  penalties,  Tokio  Clearing-house 345 

Rules  regulating  clearing-matter 50 

Rules  relating  to  expenditures,  Tokio  Clearing-house 345 

Rules  relating  to  manager  and  secretary,  Tokio  Clearing-house  344 

Runners'  exchange,   Philadelphia   210 

Philadelphia,  due-bill  211 


St.  Joseph,  Mo.,  charges  on  collections 20 

rate  on  average  balances 13 

St.  Louis  Clearing-house 285 

rank  of   296 

St.  Louis  Clearing-house  association,  membership  of 286 

organization   of    285 

St.  Louis  in  1873,  issue  of  loan  certificates  at 95 

St.  Paul,  Minn.,  clearing  regulations 52 

San  Francisco,  Cal.,  two  clearings  per  day S7 

Savannah,  Ga.,  clearing  regulations $2 

Scale  of  fines.  New  York 201 

Schedule  of  collection  charges,  Rochester,  N.  Y 15 


378  INDEX 

PAGE 

Scranton,  Pa.,  clearing  regulations 52 

Sealed  bags  or  packages,  reclamations  for  errors  or  deficiencies 

in  contents  of,  New  York 196 

Second  delivery  voucher,  Toronto  Clearing-house 306 

Toronto  Clearing-house,  fac-simile  of 309 

Second  exchange,  Philadelphia,  William  H.  Rhawn,  proposed 

introduction  of 210 

Second  issue  of  Clearing-house  loan  certificates 87 

Second  issue  of  loan  certificates  by  New  York  association 90 

Second  location  of  New  York  Clearing-house 135 

Second  ticket,  New  York , 180 

form  of,  New  York 185 

Secretary,  Tokio  Clearing-house,  rules  relating  to  manager  and  344 
Securities  in  the  custody  of  Philadelphia  Clearing-house  com- 
mittee, examination  of   220 

Sedalia,  Mo.,  Clearing-house  association 65 

Settlement   8 

Canadian  Clearing-houses,  medium  of 316 

Chicago  Clearing-house,  method  of 268 

Settlement  of  balances 25,  26,  27 

Boston 232 

Boston,  circulating  notes  in  229 

Chicago  Clearing-house   268 

Japanese  Clearing-houses  336 

methods  of 36 

record  of  money  and  certificates  used  in 194 

Tokio  Clearing-house   340 

with  money  37 

Settlement  of  claims,  Tokio  Clearing-house 340 

Settlement  of  Clearing-house  balances 35 

Settlement  sheets,  Tokio  Clearing-house,  manager's 341 

Settlements,  Canadian  37 

Chicago  Clearing-house,  cash 272 

of  amounts  of  orders,  Chicago  Clearing-house 274 

Settling  balances,  Chicago  Clearing-house,  kinds  of  money  em- 
ployed in   268 

Philadelphia,  method  of 212 

without  money 40 

Settling  by  draft 42,  45 

Settling  clerk,  New  York 176 

form  of  small  ticket  deposited  by  messenger  with,    New 

York    179 

Tokio  Clearing-house,  duties  of 340 

Settling  clerks,  messengers  and 53 

Settling  clerk's  report  to  his  bank  of  daily  balances,  form  of. 

New  York 189 

Settling  clerk's  statement,  foreign  department,   Boston  Clear- 
ing-house     258 

foreign  department,  Boston  Clearing-house,  form  of 261 

form  of.  New  York 183 

Settling  sheet,  Toronto  Clearing-houses,  manager's 306 

Shares,  Clearing-house,  New  York 200 

Sheet  for  entering  balances,  London 328 


INDEX  379 


PAGE 


Sheet,  form  of  proof  clerk's,  New  York 187 

Toronto  Clearing-houses,  manager's  settling 306 

Sheets,  method  of  finding  error  in  clerks',  New  York 188 

Sherer,  William,  present  manager  New  York  Clearing-house..  142 

Shipping  currency  by  express 24 

Silver,  objection  to 38 

Single  instance  of  failure,  Canadian  Clearing-houses 303 

Sioux  City,  la.,  rate  on  bank  balances 13 

Skeleton  of  quarterly  statement  of  national  banks.  New  York 

Clearing-house   165 

Skeleton   of  the  quarterly   statement   of  the   condition   of  the 

State  banks  of  the  city  of  New  York 166 

Skeleton  of  the  weekly  statement  of  the  associated  banks  of  the 

city  of  New  York 162 

Skeleton  of  weekly  statement  of  non-member  banks,  New  York 

Clearing-house   167 

Slip,  exchange,  New  York 176 

form  of  exchange,  New  York 177 

Slips,  Cincinnati 55 

of  Tokio  credit  banks,  balance 341 

Smallest  balance  from  one  day's  exchanges,  New  York  Clear- 
ing-house     208 

Smallest  balance  paid  by  New  York  Clearing-house  to  one  bank  208 
Smallest  balance  paid  to  New  York  Clearing-house  by  one  bank  208 
Smallest  transactions  for  one  day.  New  York  Clearing-house..  207 

Small  ticket,  New  York 177,  179 

deposited  by  messenger  with  settling  clerk,  fac-simile  of. 

New  York   179 

Special  bank  examiners 25 

Special  features  of  Atlanta  loan  certificates 117 

Special  functions  of  a  Clearing-house n 

Springfield,  Mass.,  clearing  regulations 51 

Springfield,  O.,  clearing  regulations 51 

State  banks  of  the  city  of  New  York,  skeleton  of  the  quarterly 

statement  of  the  condition  of  the 166 

State  bank  statements,  form  used  at  New  York  Clearing-house 

in  tabulating  161 

Statement,  Boston,  weekly 239 

employed  at  Toronto,  form  of  delivery 305 

form  of  settling  clerk's,  New  York. 183 

form  of  Toronto  Clearing-houses,  delivery 305 

of  associated  banks,  Boston 241 

of  average  condition,  Philadelphia 218 

Philadelphia,  daily    ,•  • .- •  217 

required  by  the  New  York  Clearing-house  association  of 

trust  companies,  form  of iSp 

required  of  associated  banks.   New  York  Clearing-house, 

form  of  104 

required  of  Philadelphia  banks,  weekly 215 

Statement  of  condition,  St.  Louis  Clearing-house 288 

of  members,  Chicago  Clearing-house •  •  •  •  •  VI 

Statement  of  national  banks,  New  York  Clearing-house,  skele- 
ton of  quarterly  • ^^5 


38o 


INDEX 


PAGE 

Statement  of  non-member  banks,   New  York  Clearing-house, 

skeleton  of  weekly   167 

Statement  of  the  associated  banks  of  the  city  of  New  York, 

skeleton  of  weekly   162 

form  of  summary  of  weekly 163 

Statement  of  the  condition  of  the  State  banks  of  the  city  of  New 

York,  skeleton  of  quarterly 166 

Statement  of  weekly  averages  of  Brooklyn  non-member  banks, 

form  of  156 

Statements,  form  used  at  New  York  Clearing-house  in  tabulat- 
ing national  bank  160 

form  used  at  New  York  Clearing-house  in  tabulating  State 

bank 161 

of  condition,  Canadian  Clearing-houses 318 

Philadelphia,  provision  regarding  216 

Stationery  used  by  banks,  New  York 177 

Statistics  of  membership,  New  York  Clearing-house 147 

Suggestions  on  banks  and  currency  of  the  several  United  States, 

Albert  Gallatin 130 

Suspension  of  members.  New  York  Clearing-house,  expulsion 

and  149 

Philadelphia 222 

St.  Louis  Clearing-house  286 

Summary  of  weekly  statement  of  the  associated  banks  of  the 

city  of  New  York,  form  of 163 

System,  Birmingham  currency  118 

for  Long  Island  banks,  clearing  system  for 66 

of  collection  charges,  St.  Louis,  Mo 17 

possible  developments  of  the  Clearing-house 23 

Systems  of  the  Dominion  of  Canada,  banking  and  currency 297 

Table  showing  balances  paid  in  money  for  forty-six  years,  New 

York    205 

Table  showing  clearings  for  forty-six  years.  New  York 203 

Tabulating  national  bank  statements,  form  used  at  New  York 

Clearing-house  in   160 

Tabulating   State   bank   statements,   form   used  at   New   York 

Clearing-house  in   161 

Tardiness,  fines  for 54 

fines  for,  Milwaukee 54 

Telegraph,  transfers  by,  Denver 21 

Tender  certificates,  legal 42,  45 

Terms,  Clearing-house   3 

Third  issue  of  Clearing-house  loan  certificates 87 

Third  location  of  New  York  Clearing-house I37 

Ticket  deposited  by  messenger  with  settling  clerk,  fac-simile  of 

small.  New  York I79 

Ticket,  first.  New  York 176 

foreign  department,  Boston  Clearing-house,  exchange 253 

form  of  first  or  credit,  New  York 178 

form  of  second.  New  York 185 

for  payments,  London,  white 333 

for  receipts,  London,  green 332 


INDEX 


38: 


PAGE 

Ticket,  second,  New  York 180 

small,  New  York  177,  179 

used  by  Boston  banks  for  notifying  manager  of  amounts 
paid  in  making  settlements 234 

Time  allowed  for  making  exchanges,  New  York 184 

Time  required  to  make  exchanges 56 

New  York  56 

To  clear   4 

Tokio  clearing  banks,  rules  concerning 342 

Tokio  Clearing-house  committee,  duties  and  powers  of 344 

provisions  relating  to   344 

Tokio  Clearing-house,  application  for  membership  in 342 

arrangement  of  banks  in 339 

association   335 

banks  eligible  to  membership  in 342 

clearing  for  non-members   343 

clearing  matter 340 

dishonored  items  341 

duties  of  settling  clerk 340 

expenses  of 342 

/  hours  of  clearing 340 

kinds  of  meetings   343 

manager's  settlement  sheets 341 

members'  deposit  with 342 

expulsion  of 343 

members  of  33^ 

object  of 340 

provision  respecting  changes  of  constitution  and  by-laws. .  345 

refusal  to  pay  dishonored  bills 343 

reorganization  of  337 

retirement  of  members   343 

rules  and  regulations  of 34° 

rules  for  clearing 340 

rules  of 337 

rules  regarding  penalties   345 

rules  relating  to  expenditures 345 

rules  relating  to  manager  and  secretary 344 

settlement  of  balances  340 

settlement  of  claims  340 

Tokio  credit  banks,  balance  slips  of 341 

Toledo,  O.,  clearing  regulations 5i 

rate  of  charges  16 

Topeka.   Kan.,  clearing  regulations 51 

rates  of  collection   I7 

Trading  balances,  Chicago  Clearing-house 270 

Chicago,  forms  of  reports  used  in •  271 

Transferring  balances  that  have  been  loaned,  Chicago,  form  of     < 
order  used  in   • ^73 

Transactions  for  one  day,  New  York  Clearing-house,  largest..  207 
New  York  Clearing-house,  smallest 207 

Transactions,  number  of.  New  York 170 

St.  Louis  Clearing-house,  manager's  records  of 294 

Transfer  of  Clearing-house  certificates,  fine  for,  New  York....   190 


382  INDEX 


PAGE 


Transfers  by  telegraph,  Denver  21 

Treatment  of  defaulting  members,  New  York 194 

Treatment  of  notes,  Canadian  Clearing-houses 317 

Toronto  Clearing-houses,  credit  voucher 308 

debit  vouchers   310 

examination  of  items  310 

fac-simile  of  credit  voucher  used  at 313 

fac-simile  of  debit  voucher  used  at 315 

fac-simile  of  first  delivery  voucher 307 

fac-simile  of  second  delivery  voucher 309 

form  of  delivery  statement 305 

form  of  delivery  statement  employed  at 305 

form  of  proof  used  in 311 

manager's  settling  sheet 306 

second  delivery  voucher  306 

Treasurer,  duties  of  25 

Trust  companies,  Boston,  clearing  for  outside  banks  and 238 

form  of  statement  required  by  the   New  York   Clearing- 
house association  of  159 

to  New  York  Clearing-house,  relationship  of 157 

Trust  fund,  Boston  238 

Two  clearings  a  day 57 

Two  clearings  per  day,  New  Bedford,  Mass 57 

Philadelphia 57 

San  Francisco,  Cal 57 

Uniform  rates  of  exchange,  fixing 14 

Uniform  rates  of  interest  on  deposits 24 

fixing    13 

Use  of  checks  and  drafts,  extensive 62 

Value  of  Clearing-house  loan  certificates 81 

Vice-president,  duties  of 29 

View  in  Clearing-room,  New  York  Clearing-house 181 

View  in  manager's  and  assistant  manager's  rooms.  New  York 

Clearing-house   143 

View  of  New  York  Clearing-house 139 

Volume  of  clearings,  Chicago  Clearing-house 280 

Voucher,  Toronto  Clearing-houses,  credit 308 

Toronto  Clearing-houses,  fac-simile  of  first  delivery 307 

Toronto  Clearing-houses,  fac-simile  of  second  delivery 309 

Toronto  Clearing-houses,  second  delivery  306 

Voucher  used  at  Toronto,  fac-simile  of  credit 313 

fac-simile  of  debit 3^5 

Vouchers,  Toronto  Clearing-house,  credit 310 

Waco,  Tex.,  clearing  regulations 52 

Washington,  D.  C,  clearing  regulations 52 

Weekly   averages   of    Brooklyn    non-member   banks,    form    of 

statement  of   156 

Weekly  return,  Boston,  average 240 


INDEX 


383 


PAGE 

Weekly  statement,  Boston 239 

of  non-member  banks,   New  York  Clearing-house,  skele- 
ton of 167 

required  of  Philadelphia  banks 215 

with    Boston   and    New   York   statements,    comparison    of 
Philadelphia 216 

Weekly  statement  of  the  associated  banks  of  the  city  of  New 

York,  form  of  summary  of 163 

skeleton  of  the  162 

West  Superior,  Wis.,  charges  on  collections 19 

roll  call  of  clerks 54 

White  ticket  for  payments,  London 333 

Withdrawal  of  members,  Boston 243 

Canadian  Clearing-houses   303 

Chicago  Clearing-house   279 

Woodward  Brothers,  journey  of  check  drawn  by 74 

Worcester,  Mass.,  clearing  regulations 51 

Youngstown,  O.,  clearing  regulations 52 


f^'    or  iBB 


w 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 
This  book  is  DUE  on  the  last  date  stamped  below. 


<^ttf!iPf!!IB'lffie3SuTeH 25  cents  On  first ^<^  -^*   ^..  ..-, 

'  '*   ■  50  cents  on  fourth  day  overdue  .  <  tifaj.7^ 

C^eck>Uar  0fl  $CYj9fltii.iiay'OVeiNkM9,--J* 


OCT    8   1947 


OCT  16  1947 


DEC  16  1947 


JAN     5  194{; 


MAR  23  1948 


30»a<'S0U^ 

■^y.    n  in 
APR    9'«3^^' 

LD  21-100m-12,*46(A2012sl6)4120 


6Wav'58BB 


5 

-J 

a: 


o: 

CO 


5 

O 


SENT  ON  ILL 

SEP  1  7  2003 

U.  C.  BERKELEY 


YC 


